2015 - fly tucson · ii tucson airport authority 2015 cafr 2015 board of directors and members...

2015TUCSON AIRPORT AUTHORITYCOMPREHENSIVE ANNUAL FINANCIAL REPORT

Prepared by the Finance DepartmentYears Ended September 30, 2015 and 2014

Tucson, Arizona

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Mission StatementThe mission of the Tucson Airport Authority is to promote aviation and foster economic development by strategically planning, developing and operating the most effective,efficient and safest airport system for southern Arizona.

ii TUCSON AIRPORT AUTHORITY 2015 CAFR

2015 Board of Directors and Members

ACTIVE MEMBERS

Judith K. AbramsOwnerJudith K. Abrams Consulting

*Hal D. AdamsonPresidentAdamac Rubber Mfg., Inc.

*Larry R. Adamson, Esq.ShareholderDuffield, Adamson,Helenbolt, P.C.

Bruce I. AshPresidentPaul Ash ManagementCo., L.L.C.

William R. AssenmacherPresident & CEOCAID Industries, Inc.

Raymond BernalManagementBig RiverDevelopment Ent.

Henry K. BoicePresidentNorthern Trust Company

Paul J. Bonavia(Ret.) Chairman,President, CEOUnisource Energy Corp.

*Susan G. BoswellAttorneyQuarles & Brady L.L.P.

John H. BremondPresidentBremond Company, L.L.C.

Archibald M. Brown, Jr.RetiredMerlin, Inc.

Chanda S. BudhabhattiVice PresidentA&A StructuralEngineers, Inc.

Joseph R. CesarePresidentBroadway Realty &Trust, Inc.

Francis X. ChambersDirector,AvPORTS

Thomas E. ChestnutPresident/CEOChestnut ConstructionCorporation

Stephen W. ChristyChairmanArizona StateTransportation Board/VIP Mortgage

Ginny L. ClementsChairmanGolden EagleDistributors, Inc.

D. June CrawfordPresidentCopygraphix, Inc.

Richard DavisPartner/Trial LawyerMesch, Clark &Rothschild P.C.

Patty DoarOwner/CEOArizona Inn

*Darryl B. DobrasPresidentDBD Investments

Robert L. DraperPresidentO’Rielly Chevrolet, Inc.

Michael J. DuranVice President & ChiefDevelopment OfficerTucson Medical Center& TMC Foundation

Bruce L. DusenberryPresidentHorizon MovingSystems, Inc.

Stephen Eggen, Jr.RetiredRaytheon Missle Systems

Vance L. FalbaumSr. Vice President &Financial AdvisorRBC WealthManagement

George Favela(Ret.) Director, State & Local Government AffairsCenturyLink

John L. FendenheimOwnerFendenheim Enterprises

Sally G. FernandezPresidentSafety Dynamics, Inc.

Louise L. Francesconi(Ret.) PresidentRaytheon Missile Systems

Michael W. FranksPresidentSeaver Franks Architects

Peter V. GalloPresidentMonterey Water Co.

Jaime Esteban GibbonsOwnerABCD Realty, Ltd.

Dr. Thomas GroganFounder & ChiefMedical OfficerVentana MedicalSystems, Inc.

David E. HameroffAttorneyThe Hameroff LawFirm, P.C.

Michael S. HammondPresident/CEOCushman & WakefieldPICOR CommercialReal Estate Services

Edward D. HarrowColonel, USAF, Ret.Past Executive DirectorPima Air andSpace Museum

Duff HearonPresident/CEOAshland Group &The Hearon Co.

Lawrence M. HeckerAttorneyHecker & Muehlebach,P.L.L.C.

K. La Monte HunleyOwnerArizona Health, L.L.C.

*Lisa H. IsraelPresident/CEOLa Posada atPark Center, Inc.

Todd JacksonAttorneyJackson & Oden, P.C.

Herb KaiManagerKai Family Entities

Francine KatzJewish Federationof Southern ArizonaSr. Vice President

Gary KippurPresidentTucson Iron & Metal

Rosemary J. KoberleinChief Executive OfficerLong Companies

Roy W. KylePartnerLewis and RocaRothgerber L.L.P.

Larry M. LangPresidentDiversified Design &Construction, Inc.

Dr. Taylor W. LawrencePresidentRaytheon Missile Systems

Jan LesherDeputy County AdministratorPima County Administration

Humberto S. LopezPresidentHSL Properties, Inc.

David M. Lovitt, Jr.PresidentDM Lovitt InsuranceAgency

David LyonsExecutive Vice President,Regional PresidentNational Bank of Arizona

Michael McGrathPartnerMesch, Clark &Rothschild P.C.

David L. McPherson(Ret.) Sr. Vice PresidentRaytheon Missile Systems

Sharon B. Megdal, Ph.D.Director, Water ResourcesResearch CenterThe University of Arizona

Frances McL. MerrymanVice PresidentSr. Wealth StrategistNorthern Trust Company

Forrest L. MetzPresidentUrban Engineering, Inc.

BOARD OF DIRECTORS

CHAIRMAN

Steven R. ColePresidentSouthwest Appraisal Associates

VICE CHAIRMAN

James H. Moore, Jr.President/CEOUniversity of ArizonaFoundation

TREASURER

Steven D. Fell(Ret.) Senior Vice PresidentCommercial BankingManagerNational Bank of Arizona

SECRETARY

Tony FinleyChief Financial OfficerLong Companies/Long Realty Company

DIRECTOR

David GoldsteinPresidentDiamond Ventures, Incorporated

DIRECTOR

Lisa LovalloVice President andMarket Manager Cox Southern Arizona.

DIRECTOR

Michael F. HannleyPresident & CEOBank of Tucson

DIRECTOR

Judy PatrickBoard ChairCopper Point Mutual Insurance Co.

DIRECTOR

Taunya VillicanaCo-Founder/CEOAffinity Wealth Management

iMMEDIATE PAST CHAIR

EX-OFFICIO

Edwin L. Biggers(Ret.) Vice PresidentHughes Aircraft Co.

EX-OFFICIO

Bonnie A. AllinPresident/CEOTucson Airport Authority

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Dennis MinanoStrategic ConsultantDRM Strategies

Omar MirelesPresidentHSL Asset Management

Chris MonsonOwnerAberdeen Group

Rebecca R. Montaño, Ed.D.Educational ConsultantEducation TrustBeat the Odds Institute

Rick T. Myers, Jr.University of ArizonaBoard of Regents

Ned L. Norris, Jr.ChairmanTohono O’odham Nation

Tim J. OvertonVice President of BusinessLending & ServicesVantage West Credit Union

Steve PagnuccoGeneral Manager,Manufacturing DivisionUniversal Avionics

Richard D. ParlettPresidentGeneral Tool & Supply Co.Industrial Tool and SupplyDivision

Lea Márquez PetersonPresident/CEOTucson Hispanic Chamberof Commerce

Gregory A. Pivirotto(Ret.) President/CEOUniversity Medical Center

Ricardo PlattAccount ExecutiveCrest Insurance

*Timothy J. ProutyManaging Director,Brokerage ServicesCB Richard EllisTucson, L.L.C.

Stephen E. QuinlanChairmanLong Realty Company

James F. RonstadtCFORonstadt Insurance Co.

Joaquin RuizDean, College of ScienceThe University of Arizona

Ronald K. SablePresidentConcord Solutions Ltd.

Rubin Salter, Jr.AttorneyRubin Salter, Jr.Law Offices

S. L. SchorrSenior PartnerLewis and RocaRothgerber L.L.P.

*Christopher H. SheafePresidentC. Sheafe Company

Keri L. SilvynAttorney/Partner/OwnerLazarus, Silvyn &Bangs, P.C.

*Ted Sitterley, Jr.(Ret.) Financial Executive

David C. SmallhouseManaging PartnerMiramar Ventures, L.L.C.

Lucinda J. SmedleyPublisher/PrincipalTREND Report/RealEstate Consulting Group

Michael StilbPresident/Managing DirectorCBRE-MAS

Phillip SwaimPresidentSwaim Associates, Ltd.

Steven ThuManaging Partner4-D Properties

Steven D. TouchéPresidentLovitt & Touché, Inc.

Richard K. UnderwoodPresidentAAA Landscape

Izaro UrreiztietaSenior Vice President &ManagerTucson CommercialBanking, BBVA Compass

Mercy A. Valencia, Ed.D.(Ret.) AssistantVice PresidentReal Estate AdministrationUniversity of Arizona

Jonathan D. Walker(Ret.) President/CEOMetropolitan TucsonConvention &Visitors Bureau

Katherine R. WardPrincipalGV Strategic AdvisorsPresident

Michael R. WattisPresidentMichael R. Wattis, Inc.

Ellen K. Wheeler, J.D.Asst. County AdministratorPima County

*Thomas A. ZlaketAttorneyThomas A. Zlaket, P.L.L.C.

LIFE MEMBERS

*Laura T. Almquist

*Hal W. Ashton

Edith Sayre Auslander

*Elizabeth T. Bilby

*Fred T. Boice

James J. Burns

Jack C. Camper

*John L. Carter

Paul W. Cella

Jim H. Click, Jr.

Jack D. Davis

Lee Davis

Donald R. Diamond

*Katie Dusenberry

*Arnold R. Elias

*Robert A. Elliott

Dr. Roy Flores

Edward S. Frohling

Arthur L. Gonzales

Elizabeth Gonzalez

Michael W. Hard

Barbara L. Harper

Dr. Ann Weaver Hart

John L. Huerta

*Richard F. Imwalle

*Charles Jackson

Daisy M. Jenkins

Robert Johnston

Darryl O. Jones

Al Kivel

Dr. Henry Koffler

Meg Olson Lee

Dr. Peter Likins

Richard Lukso

Christopher Maloney

S. James Manilla, Ph.D.

Octavio A. Molera, Ph.D.

*Gary M. Munsinger, Ph.D.

James E. Neihart

*R. B. O’Rielly

*William E. Page

Mary Levy Peachin

Bobby R. Pennington

Lloyd J. Perper

Charles M. Pettis

*Ernesto V. Portillo

*Karl G. Ronstadt

*Lowell E. Rothschild

Roberto C. Ruiz

Warren S. Rustand

Richard L. Sainz

*James M. Sakrison

John P. Schaefer, Ph.D.

Floyd W. Sedlmayr, Jr.

George Steele

*Jacob F. Struble

Richard S. Walden

Arthur B. (Art) Waller

Paul Weitman

*Joseph B. Wilcox

David T.C. Wright

*Past President/Chairman

iv TUCSON AIRPORT AUTHORITY 2015 CAFR

Table of Contents

INTRODUCTION SECTION

Transmittal Letter Organization 1 Economic Conditions and Outlook 2 2015 Air Travel Industry Recap 2 2016 Air Travel Industry Outlook 2 State and Local Economic Outlook 3 Air Service at Tucson International Airport 3 Major Initiatives 5 Capital Improvement Program 5 Major Maintenance Program 7 Federal and State Funding 7 Passenger Facility Charge Program 7 Leasing, Business Development and Concession Activity 8 Financial Policies and Practices 9 Internal Control Environment 9 Budgetary Controls 9 Long-Term Financial Planning 11 Cash Management and Investments 11 Capital Financing and Debt Management 11 Risk Management 12 Pension and Other Post-Employment Benefits 12 Other Information 13 Community Involvement 13 Requests For Information 14 Awards and Acknowledgements 14Certificate of Achievement 15Organizational Structure 16Airlines and Tenants 17

FINANCIAL SECTION

Independent Auditors’ Report 19Management’s Discussion and Analysis 21Statements of Net Position 36Statements of Revenues, Expenses and Changes in Net Position 40Statements of Cash Flows 41Notes to Financial Statements Note 1 Organization and Reporting Entity 43 Note 2 Summary of Significant Accounting Policies 43 Note 3 Cash, Cash Equivalents and Investments 47

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FINANCIAL SECTION (continued)

Note 4 Inventories 51 Note 5 Capital Assets 52 Note 6 Unearned Revenues 54 Note 7 Long-Term Debt 54 Note 8 Pension Plans 56 Note 9 Operating Leases with Lessees 76 Note 10 Concentration of Operating Revenues 76 Note 11 Passenger Facility Charges 76 Note 12 Risk Management 77 Note 13 Commitments 77 Note 14 Environmental Matters, Litigation and Contingencies 77 Note 15 Prior Period Adjustment 79 Note 16 Change in Method of Accounting for Pensions 79Schedule of the Authority’s Proportionate Share of the Net Pension Liability Cost Sharing Plan 80 Multiyear Schedule of Changes in Net Position Liability (Aset) and Related Ratios Agent Retirement Plan Fire Department 82 Police Department 84 Multiyear Schedule of Pension Contributions 86 Notes to Required Supplementary Information 88

STATISTICAL SECTION

Financial Trends Net Position and Changes in Net Position 92Revenue Capacity Principal Revenues Sources 94 Principal Revenue Source Ratios 96 Rates and Charges 96Debt Capacity Ratios of Outstanding Debt, Debt Service and Debt Limits 98 Airport Revenue Bond Coverage Per Bond Resolutions 100Demographic and Economic Information Population in the Air Service Area 102 Unemployment Rates in the Air Service Area 102 Major Employers in the Air Service Area 104Operating Information Authority Employees 106 Airport Information – Tucson International Airport 108 Airport Information – Ryan Airfield 110 Passenger, Cargo and Mail Summary 112 Aircraft Operations Summary 114 Enplaned Passengers By Scheduled Carrier 114 Scheduled Carrier Landed Weights 116 Scheduled Air Service Information 118

INTRODUCTION 1

April 25, 2016

Board of Directors Tucson Airport Authority 7250 S. Tucson Blvd., Suite 300 Tucson, Arizona 85756

Ladies and Gentlemen:

It is our pleasure to present the Comprehensive Annual Financial Report (CAFR) of the Tucson Airport Authority, Inc. (Authority) for the fiscal year ended September 30, 2015. Responsibility for both the accuracy of the data and completeness and fairness of the presentation, including all disclosures, rests with management of the Authority. To the best of our knowledge and belief the enclosed information is accurate and complete in all material respects and reported in a manner designed to present fairly the financial position, results of operations, and cash flows in accordance with Generally Accepted Accounting Principles (GAAP).

GAAP requires that management provide a narrative overview and analysis to accompany the financial statements in the form of a Management’s Discussion and Analysis (MD&A). This introductory letter should be read in conjunction with the MD&A, which can be found immediately following the report of the independent auditors in the financial section of the CAFR.

OrganizationThe Authority was established on April 12, 1948, as a civic, non-profit corporation, as provided for under Arizona law, to develop, promote, operate and maintain airports and air transportation facilities adjacent to the City of Tucson (City) and in Pima County (County). Under Arizona law, the City is authorized to acquire, own, control, equip, improve, maintain, operate, and regulate airports and enter into agreements with corporations engaged in the air transportation industry for the operation of airports. The Authority operates Tucson International Airport (TIA) and Ryan Airfield (Ryan) as an essential government function under Arizona law.

Prior to FY 2014, the Authority’s bylaws called for active membership of up to 115 individuals who are residents of TIA’s service area. The bylaws were amended in 2014 to reduce the maximum number of active members to 85. During a transition period, the number of active members is allowed to temporarily exceed 85. There were 105 active members as of September 30, 2015. Vacancies are filled through a nomination process and election by active members at each annual meeting.

The Authority is governed by a Board of Directors (Board) consisting of no more than eleven and no less than seven members, including two ex-officio members, the immediate past chair and the president/chief executive officer (CEO). The remaining directors are elected by active Authority members, typically to staggered terms of three consecutive years, and may serve a maximum of two successive terms. There are currently nine elected and two ex-officio board members. Directors receive no salary or compensation for their services, but by resolution of the Board may be reimbursed for actual expenses paid or obligated to be paid in connection with services rendered solely for the benefit of the Authority.

The Board appoints the CEO, who serves at its pleasure. The Authority’s staff is organized into two divisions, each managed by personnel appointed by and reporting directly to the CEO. These two divisions are Administration and Finance, and Operations and Projects. Additionally, the CEO appoints a General Counsel and Executive Assistant to the CEO, both reporting to the CEO. The organizational chart that follows this letter reflects the operational structure as of September 30, 2015.

The Authority’s airport system consists of TIA and Ryan. TIA is a commercial service airport serving the Tucson metropolitan area, southern Arizona and northern Sonora, Mexico. Ryan serves as a general aviation reliever airport for TIA.

TIA encompasses 8,343 acres of land and is located eight miles south of the City’s central business district. There are approximately 130 separate buildings on the airport property providing approximately 2.5 million square feet of floor space.

2 TUCSON AIRPORT AUTHORITY 2015 CAFR

On October 14, 1948, the City and the Authority entered into a 25-year lease for TIA. A March 15, 1971 amendment extended the term of the lease to October 14, 2023 and provided an option to extend the term of the lease to October 14, 2048. The Authority exercised this extension option in 1986. A July 7, 2015 amendment extended the term of the lease to October 14, 2073 and provided an option to extend the term of the lease to October 14, 2098.

The TIA lease obligates the Authority to make rent payments to the City, calculated by taking gross operating revenues and deducting operating expenses and certain other funding requirements. The Arizona Superior Court, in and for the County, approved the validity of the lease and ruled that in calculating rents due the City, the Authority may deduct a sum equal to the total amount required to pay all of its outstanding obligations, regardless of what amount may be due in any year. The Authority has not been required to make any payments to the City under this formula and does not expect an obligation to do so while its revenue bonds are outstanding.

Ryan, located 12 miles southwest of downtown Tucson, encompasses 1,804 acres of land and accommodates a wide variety of general aviation and military activity. The Authority holds a separate lease for Ryan with the City that expires in 2053. The lease was originally entered into with the State of Arizona on August 31, 1954, but ownership of the land was transferred by the State of Arizona and accepted by the City on December 21, 1959. Annual lease payments are based on a nominal amount ($.05 per acre), plus 10% of Ryan’s net profits. The Authority has not been required to make any payments to the City under the percentage of net profits provision and does not expect an obligation to do so in the foreseeable future.

Economic Conditions and Outlook2015 Air Travel Industry Recap

A rise in passenger levels, airline pricing power and declining jet fuel prices combined to make 2015 another record setting year for airline industry financial performance. In January 2016, airline trade group Airlines for America estimated U.S. airlines’ 2015 combined net income at $17.9 billion, surpassing the previous record of $16.5 billion set in 2006.

According to figures from the U.S. Department of Transportation Bureau of Transportation Statistics, total domestic passenger enplanements in 2015 increased 5% from the previous year. With the increase in airline seat capacity again lagging the increase in passenger seat miles in 2015, domestic airline average load factor increased to a record 85% from 84.5% in 2014. An improving U.S. economy is credited for the increase in passengers. Airline industry mergers, falling fuel prices, and lack of new entrant competitors, as well as strict adherence to capacity discipline has enabled airlines to price air travel at profitable levels.

While overall airline domestic capacity growth was a healthy 5.3% in 2015, increases were once again concentrated at large hub airports. Conversely, most smaller airports like TIA saw further declines or little to no overall capacity growth. This continued a trend that began after severe capacity reductions at all airports throughout the country sparked by a jet fuel price spike and the beginning of the economic recession in 2008. Since then, large airports have recovered most of the capacity they lost while most smaller airports have not. The airlines consider adding capacity at large hub airports to be lower risk.

Experiencing sustained profits and mindful of recent historically high oil prices, airlines continued with efforts to replace aging aircraft with new, more fuel-efficient models. As part of this process, smaller regional jets (50-seat and less), which are less fuel-efficient on a per-passenger basis than larger aircraft, are being phased out. As smaller aircraft are replaced with larger ones, many smaller airports (where all or some portion of flights are currently conducted with small regional jets) have experienced either loss of service altogether on routes currently with a single daily flight where a larger aircraft size cannot be justified, or fewer flights per day on routes that currently have multiple flights per day, or both.

2016 Air Travel Industry Outlook

The financial health and profitability of U.S. airlines is expected to continue in 2016 due to recent drops in the price of oil and jet fuel. Fleet renewal programs, primarily in the replacement of small regional jets, are again expected to gradually impact smaller airports. Domestic capacity growth of 5.3% in 2015 was driven by low cost and ultra-low cost carriers, as well as legacy carriers, who in recent years had shown flat to negative capacity growth. Most legacy carriers are planning less robust capacity growth in 2016 in order to increase pricing power, while growth in the low and ultra-low cost sector is expected to continue at a higher rate.

Organization (continued)

INTRODUCTION 3

State and Local Economic Outlook

Economic conditions are an important factor in how often people travel. This in turn impacts passenger levels at airports, how much money passengers and visitors spend at airports, and airline decisions on maintaining and adding new service at individual airports.

The U.S. Census Bureau defines the Tucson Metropolitan Statistical Area (MSA) as being all of Pima County. The County covers an area of approximately 9,240 square miles and had an estimated population of 1,009,371 as of July 1, 2015, which represents an increase of 0.2% from July 1, 2014. The Tucson metro area consists of about 495 square miles that contains more than 95% of the County’s population, including the incorporated municipalities of Tucson, Marana, Oro Valley, Sahuarita and South Tucson and 31% of the population that resides in unincorporated areas. The metro area is the origin or destination of most airport users.

Tourism and recreation are important components of the Tucson economy. The area has a sunny climate with a high temperature averaging 82 degrees and a low of 55. Average annual precipitation is approximately 11 inches. Tucson averages 350 days of sunshine a year, creating ideal conditions for year-round play at approximately fifty golf courses in and around the city. These and other visitor benefits are aggressively marketed by local businesses and Visit Tucson, the area’s destination marketing organization. Tourism has been a significant contributor to past growth in annual passenger traffic at TIA.

The Tucson area is also home to a diverse group of employers in industry sectors such as aerospace, defense, biotechnology and solar energy. Davis-Monthan Air Force Base in Tucson and Fort Huachuca Army Intelligence Center southeast of Tucson are also two of the area’s largest employers. The University of Arizona, Pima Community College and a large health care sector are other significant sources of jobs for southern Arizona residents.

Arizona’s rapid population growth leading up to the economic recession that began in 2008 led to a thriving homebuilding industry. Reliance on this industry for economic growth contributed to Arizona and Tucson being among the hardest hit areas in the country with the burst of the housing bubble beginning in 2007. The nationwide recovery from the recession has been slow, and Arizona and Tucson have lagged the rest of the country due primarily to the dramatic slowdown in population growth and very weak recovery in homebuilding. Federal fiscal drag due to the federal spending sequester and other federal budget cuts, as well as state and local fiscal drag, have also negatively impacted Tucson, with 21.9% of Tucson’s 2014 GDP being comprised of federal civilian and military and state and local government. This compares to 12.4% for the U.S. and 13.8% for all of Arizona.

George W. Hammond, Director of the Eller College of Management’s Economic and Business Research Center at the University of Arizona, in the December 2015 issue of Arizona’s Economy, notes that “Overall, Arizona remains stuck in low gear, in large part because fiscal drag and low U.S. residential mobility continue to hinder key sectors. The forecast calls for growth to accelerate as these factors gradually loosen their grip.” He continues, “The forecast calls for Tucson to grow during the next three years, but at a modest pace.” Hammond expects Tucson’s job growth to accelerate from 0.3% in 2015 to 1.6% by 2017, reflecting less federal, state and local fiscal drag, as well as increased U.S. residential mobility, which boosts population gains.

Air Service at Tucson International Airport

TIA is the principal air carrier airport serving metropolitan Tucson, southern Arizona and northern Sonora, Mexico. The Authority considers Pima County as its primary airport service area.

The Authority focuses its strategic air service development effort on achievable goals that are consistent with the community’s needs and the dynamics of the airline industry. TIA is subject to competition for airline services and passengers residing in the Tucson service area with Phoenix Sky Harbor Airport 110 highway miles to the north. TIA’s competitive position is strengthened economically through its relationships with key air service stakeholders that include Visit Tucson (the area’s convention and visitor’s bureau), the Metropolitan Tucson Chamber of Commerce, the Southern Arizona Leadership Council and Sun Corridor, Inc. (the area’s economic development organization).

The Authority’s primary objectives are to accommodate air service demand by increasing nonstop services throughout the U.S. to new and existing hub destinations with new and incumbent carriers, while reducing both leakage and spillage of passengers to Phoenix. Leakage refers to passengers consciously choosing to use an airport other than the airport closest to their home for reasons such as more flight options or lower fares. Spillage refers to passengers using another airport because they are unable to find a seat available at their home airport when they want to travel. Emphasis has also

Economic Conditions And Outlook (continued)


Air Service at Tucson International Airport (continued)

been directed toward attracting carriers that could serve markets appropriate for shorter-range point-to-point domestic service, as well as establishing scheduled service to key destinations in Mexico and Canada.

The airlines that provide regularly scheduled service to TIA include network carriers, their wholly owned regional carrier subsidiaries, and contract regional carriers. As no single carrier holds a dominant market position, competition remains robust along Tucson’s top origin and destination routes.

Like most airports nationwide, TIA began experiencing significant jet fuel cost and demand-related service cuts beginning in late summer 2008, a situation accelerated by the following severe economic recession. Smaller airports similar in size to TIA and having relatively greater proportions of leisure travelers (as TIA does) were among the hardest hit as airlines also refocused route networks on their large hub operations. After a number of years of stabilization in seat capacity at smaller airports like TIA, the continued effects of airline consolidation and the evolution of new airline business models resulted in another round of seat capacity reductions in 2013 and 2014 at airports similar in size and characteristics to TIA. In Tucson, the 2013 and 2014 reductions were concentrated with Southwest Airlines as they made significant adjustments to their route network and redeployed aircraft to prepare for and implement significant flight additions at Dallas Love Field upon the complete removal of Wright Amendment flight restrictions in October 2014.

While passenger traffic levels overall in the U.S. and in Tucson fell significantly in 2008 and 2009, airline seat capacity fell at an even greater rate. Consequently, airline load factors increased and have remained at levels that are approaching full passenger capacity. In this environment, increases in passenger levels are highly dependent on the addition of new capacity.

TIA’s total passenger traffic fell from 3,239,849 in FY 2014 to 3,181,901 in FY 2015, a decrease of 1.8%, as the full effect of the significant capacity cuts in 2013 and 2014 were realized. This followed a passenger decrease of 2.1% in FY 2015. Total scheduled inbound/outbound seat capacity in FY 2015 decreased 2.8% from FY 2014, after a decrease of 2.6% in the previous year.

Sixteen destination airports were served nonstop from TIA in FY 2015, an increase of one from FY 2014 with the addition of seasonal service to Houston Hobby. The nonstop destinations served in FY 2015 were:

The most significant air service developments in FY 2015 were Delta’s addition of once weekly seasonal service to Seattle and Southwest’s addition of once weekly seasonal service to Houston Hobby. On the downside, Southwest reduced the number of daily flights to Las Vegas from four to three and Alaska downgraded its daily Portland service to seasonal status.

The FY 2016 outlook for scheduled carrier service at TIA is positive. Delta added year-round three times daily service to Los Angeles in December 2015, joining Southwest, American and United on that route. Seasonal additions include daily Delta flights to Seattle and United flights to Chicago O’Hare, along with larger aircraft and more seats on Alaska’s flight to Seattle, American’s flights to Chicago O’Hare and United’s flights to Denver. On a year-round basis, the changing out of smaller regional jets with larger regional aircraft is expected to result in overall seat capacity increases on flights to San Francisco, Los Angeles, Houston and Salt Lake City.

The Authority believes that sufficient demand exists for year-round daily service to airline hub destinations such as Charlotte, Detroit, New York, Philadelphia, Washington, D.C., and several cities in Mexico. Seasonal service from one or more Canadian cities is also believed to be viable. Additionally, current load factors suggest the need for increased capacity on existing routes such as Minneapolis and Houston. Continued tight airline capacity constraints coupled with unremarkable economic growth will make success in obtaining new destinations and increased capacity on existing routes in FY 2016 challenging. Strong financial support from community businesses makes the likelihood of success


• Atlanta (ATL) • Chicago O’Hare (ORD)• Chicago Midway (MDW) • Dallas/Ft. Worth (DFW)• Denver (DEN)• Houston Bush (IAH)

• Houston Hobby (HOU)• Las Vegas (LAS)• Los Angeles (LAX)• Minneapolis (MSP)• Phoenix (PHX)

• Portland (PDX)• Salt Lake City (SLC)• San Diego (SAN)• San Francisco (SFO)• Seattle (SEA)

INTRODUCTION 5

in obtaining east coast service in FY 2016 much higher than in previous years. Additionally, the growth prospects for several regional airlines in Mexico and their willingness to explore expansion in northern Mexico also bodes well for re-establishment of service from TIA to key destinations in the northern Mexican states of Sonora and Sinaloa.

Major Initiatives

CAPITAL IMPROVEMENT PROGRAM

The Authority’s Board and management are responsible for the development of TIA and Ryan. As such, the Board approved Master Plan Updates for TIA in 2013 and for Ryan in 2011 that set out overall development plans to address future airport capital needs. The TIA Master Plan also included a land use plan which identifies the highest and best use of property owned by the Authority and identifies land which should be acquired in the future for expansion.

The Authority anticipates and responds to changing air travel needs through its Capital Improvement Program (CIP), which is updated and adopted annually. The Board defines long-term goals through updates of the Master Plans.

Capital improvement projects require funding apart from routine operating expenses. Such projects entail the purchase, construction, or replacement of the physical assets of the Authority. The purpose of the CIP process is to evaluate, prioritize, and coordinate proposed projects for a five-year period through a program reflecting the Authority’s goals.

The compilation of the CIP has as its primary goal the development of a detailed capital budget for the current fiscal year and a plan for capital development during the four subsequent years. The Board, by approving the CIP, sets a strategy and schedule for budgeting and constructing facilities at TIA and Ryan.

FY 2015 Completed CIP Construction and Projects at TIA (greater than $75,000)

Buffelgrass Mitigation-Phase 3. This project provided a chemical treatment to remove Buffelgrass from airport property. Funding: Federal Emergency Management Administration/TAA. Cost: $379,200. Contractor: Northwest Landscaping.

FY 2014 Completed CIP Construction and Projects at Ryan (greater than $75,000)

Runway Sweeper. This project was to purchase a new recirculating airside pavement sweeper. Funding: FAA/ADOT/TAA. Cost: $216,520. Vendor: H & E Equipment.

Reconstruct a Portion of Taxiway B2. This project was to reconstruct 50-foot wide asphalt pavement on Taxiway B2. The project also including milling pavement and an overlay with 2.5 inch asphalt pavement and restriping. Funding ADOT/TAA. Cost: $492,200. Engineer: Dibble Engineering. Contractor: Pavex Corporation.

Reconstruct Runway 6R Overrun. This project was to reconstruct the Runway 6R overrun, lime treat the subgrade and install new 2-inch asphalt pavement over a 4-inch base course. The project also included removing and reinstalling cut off walls and new overrun markings. Funding ADOT/TAA. Cost: $333,200. Engineer: Dibble Engineering. Contractor: Pavex Corporation.

FY 2014 CIP at TIA – Ongoing and New Projects (greater than $500,000)

Buffelgrass Mitigation - Phase 4 & 5. $1,400,000. Chemical treatment to remove Buffelgrass from airport property.

Solar Photovoltaic Project - Phase 2. $11.2 million. Construction of a solar canopy structure within additional areas of the existing main terminal parking lot at TIA. The solar canopy will generate 1.5 MGW of power annually that will be fed into the terminal complex central plant electrical system.

Main Terminal Apron Reconstruction. $42.1 million. Design and construction for the removal of the existing 12” concrete terminal apron that is at the end of its useful life and replacement with 16” concrete. The project is a multiphase project to minimize impacts to airline operations and to spread FAA/ADOT funding over multiple years.

Reconstruct Terminal Roadways. $691,000. Reconstruction of terminal roadways. Work includes re-striping.



CAPITAL IMPROVEMENT PROGRAM (continued)

Replace ARFF Vehicle. $950,000. Purchase replacement Aircraft Rescue Fire Fighting (ARFF) vehicle for TAA 212/AP763. ARFF vehicle will be equipped with a 3,000-gallon water tank, 400-gallon foam tank, 500-pound dry chemical tank and a HRET (High Reach Extendable Turret).

Taxiway Lighting and Signage. $908,000. Install taxiway lighting & lighted signs: Taxiway B (west of Runway 21, 6,000 linear feet), Taxiway B (Runway 21 & Taxiway D, 1,500 linear feet), Taxiway A13 (south of Runway 11R, 3,000 linear feet), Taxiway D1 (west of Runway 21, 1,000 linear feet), general aviation ramp (at ATCT 1,000 linear feet) and Taxiway A5 (Taxiway A to Bombardier, 7,600 linear feet).

Electrical Upgrades for Airfield Lighting. $1.5 million. Installation of upgraded runway edge lighting and cabling for Runway 3/21, installation of new cabling and isolation transformers for Runway 11L/29R semi-flush lighting and installation of new cabling in remaining taxiway edge light circuits and installation of grounding for all existing signs, pull boxes and manholes and other airfield signage improvements.

TAA Administrative Office Relocation. $4.9 million. Relocation of TAA employees to the third level of the Terminal which will open up opportunities for leasing the existing administrative office spaces.

Terminal Optimization Project. $28.3 million. Relocation of the Security Checkpoints and improving the efficiency of underutilized space including increasing concession space and improving critical building systems.

Purchase Jet Bridges. $2.4 million. Purchase 5 new jet bridges to replace obsolete jet bridges.

Reconstruct Runway 11L/29R, Connecting Taxiways & Shoulders (Design). $740,000. Design for the mill and overlay of Runway 11L/29R, connecting taxiways and shoulders.

EIS for Relocated Runway11R & Associated Taxiways. $2 million. Environmental Impact Statement (EIS) for relocated Runway 11R and associated taxiways. Includes an inventory of environmental resources within the project area, an assessment of alternatives, analysis of impacts, and the identification of potential mitigation measures and/or findings of no significant impact.

Reconstruct Taxiway D, Shoulders & Connectors (Design). $362,000. Design engineering for the mill and overlay of Taxiway D, shoulders and connectors. Includes marking and re-striping.

CCTV Upgrades. $2.4 million. Update security surveillance system to IP based high-definition cameras, replacing the existing analog matrix switch and stand-alone digital video management system with virtual video server and storage.

LAN Redundancy. $2.3 million. Install Local Area Network (LAN) redundant coverage of cabling

FY 2015 CIP at Ryan – Ongoing and New Projects (greater than $500,000)

Install Runway 15/33 and Taxiway D Lighting and Signage. $1.9 million. Install MIRL and MITL systems and signage on Runway 15/33, Taxiways D, D1, D2, D3 and E with appurtenances and Pilot Control Lighting on Runway 6.

Security Fence Upgrade - Phase 2. $945,000. This project is to install new 6-foot chain link security fencing with three-strand barbed wire along the south side of Ryan Airfield. Project also includes grading, fencing, gates and appurtenances (approximately 2,100 linear feet).

Security Fence Upgrade - Phase 3. $978,000. Construction of roadway sections with plunge basins and 6-foot chain link with three-strand barbed wire fencing at the three storm-water discharge locations along Ajo Highway that discharge onto the airfield.

Reconstruction of Restaurant Apron. $1.4 million. Reconstruction of the aircraft apron asphalt pavement (approximately 24,586 square yards) adjacent to Todd’s restaurant and the airport administration building.

Airport Pavement Management System - Taxiways. $626,400. Rehabilitate existing pavement and markings at portions of Taxiways B4 and Taxiway D.

Major Initiatives (continued)

INTRODUCTION 7

MAJOR MAINTENANCE PROGRAM

The Authority’s Board and management are responsible for the maintenance of TIA and Ryan. Accordingly, the Board approves a Major Maintenance Program (MMP) as part of each year’s budget process. MMP projects require funding apart from routine maintenance operations. The purpose of the MMP is to evaluate, prioritize, and coordinate proposed projects for a five-year period.

FY 2015 Completed MMP Projects at TIA (greater than $75,000)

Executive Terminal Spray Foam Roof System. This project installed 2 inch spray foam roofing and acrylic coating over existing roof. Funding: TAA. Cost: $80,700. Contractor: CentiMark.

HITDA Building Roof Overlay. This project consisted of the removal and replacement of metal copings and flashing, installation of protective matting and overlay of 50 mil TPO membrane. Funding: TAA. Cost: $161,000. Contractor: CentiMark.

Demolition of Abandoned Fire Station. This project called for the cut-off of all utilities, modification of the fence line and demolition of the old TIA fire station. Funding: TAA. Cost: $248,000. Contractor: Southwest Hazard Control.

FEDERAL AND STATE FUNDING

The Authority participates in the FAA’s Airport Improvement Program (AIP), which provides Airport and Airway Trust Fund money for airport development, airport planning, and noise compatibility programs. The FAA offers both entitlement and discretionary grants for eligible projects. Grants received under this program in FY 2015 totaled $5.2 million. The FAA has awarded $110 million in grants to the Authority during the past ten years.

The State of Arizona also provides grant assistance to airports. These grants may cover up to half of the Authority’s required match for AIP projects or full funding for projects of smaller size and scope. Grants received under this program in FY 2015 totaled $1.6 million. ADOT has awarded $20.8 million to the Authority during the past ten years.

PASSENGER FACILITY CHARGE PROGRAM

Passenger Facility Charges (PFCs) are fees imposed on enplaned passengers by airport sponsors to generate revenues for airport projects that increase capacity, enhance competition among and between air carriers, enhance safety or security, or mitigate noise impacts. PFCs were established by Title 49 U.S.C. §40117, and authorized airport sponsors to collect PFCs in the amount of $1.00 to $3.00 per eligible enplaning originating and connecting passenger. The Aviation Investment and Reform Act (AIR-21) increased the maximum PFC airport sponsors could collect to $4.50 per enplaning passenger. In return for the right to assess PFCs in the amount of $1.00 to $3.00, large and medium hub airports must forego up to 50% of their AIP entitlement grants. Large and medium hub airports that collect a PFC of $4.00 or $4.50 must forego 75% of their AIP entitlement grants. Airport sponsors planning to impose PFCs must apply to the FAA and meet specific requirements set forth in the enabling legislation. Airport operators may impose PFCs after receiving written approval and authorization from the FAA. As a small hub airport, TIA is currently not subject to AIP entitlement grant reductions.

Beginning February 1, 1998, the Authority imposed a PFC of $3.00 per eligible enplaning passenger at TIA under the terms of its initial PFC application and the Record of Decision (97-01-C-01-TUS) issued by the FAA. In March 2006, the Authority submitted to the FAA an amendment to its existing PFC program to increase the current PFC level from $3.00 to $4.50 per eligible enplaned passenger and a new application to impose and use PFCs at the $4.50 level for the Concourse Renovation Project. On June 6, 2006, the Authority received approval for the new application (06-02-C-00-TUS) and on April 7, 2006, the Authority received approval for the amendment. The increase in the PFC level from $3.00 per enplaning passenger to $4.50 began October 1, 2006. The Authority currently has approval from the FAA to collect $100,461,860 under PFC application 97-01-C-01-TUS and $44,194,512 under PFC application 06-02-C-00-TUS, extending through September 1, 2017. As of September 30, 2015, the Authority had earned $106,551,151 in PFCs since the inception of the program, plus associated interest.



PASSENGER FACILITY CHARGE PROGRAM (continued)

The current $4.50 PFC is expected to continue generating between $5.5 million and $6.0 million of revenue annually. The FAA’s PFC approvals included authorization to utilize PFCs for the payment of principal and interest on general airport revenue bonds issued to pay construction costs related to eligible projects. PFCs are currently being used to pay 100% of the debt service on subordinate lien revenue bonds issued in July 2001 for landside terminal expansion and land acquisitions completed in 2005, and approximately 76% of the debt service on subordinate lien revenue bonds issued in December 2006 for the Concourse Renovation Project completed in 2008.

LEASING, BUSINESS DEVELOPMENT AND CONCESSION ACTIVITY

As discussed earlier in this introduction letter, the Authority leases TIA from the City of Tucson under a long-term lease and operating agreement that previously had an expiration date of October 14, 2048. In July 2015, the Authority and the City of Tucson executed a 25-year extension of the lease, with an additional 25-year option. Without this extension, the Authority was unable to offer land leases of longer than 32 years. With significant land holdings available for large scale commercial and industrial development, the extension greatly enhances the Authority’s ability to attract private developers by offering lease terms adequate for amortization of their investment.

Aerovation, Inc., an aerospace engineering and development company based at TIA, expanded in FY 2015 by leasing from the Authority an additional 34,626 square foot hangar to support their growing business. The Authority will partner with Aerovation to make significant improvements to the hangar that will serve its longer-term needs.

Since the announcement of their merger in February 2013, discussions and planning have been ongoing with American and US Airways on the timing and logistics of how their operations will be consolidated at TIA. A key consideration in the planning has been to maintain passenger throughput balance between the two terminal concourses to ensure high levels of customer service for security checkpoint and outbound baggage processing, as well as to maximize customer service and revenue generating potential for concourse concession operations. As a result of a collaborative effort to achieve these objectives between the Authority and our airline partners, American Airlines will be consolidating its operations on Concourse B (American had been operating on Concourse A and US Airways on Concourse B), and United Airlines will be relocating its operations from Concourse B to Concourse A. These relocations and consolidations are expected to be completed in the second half of FY 2016. During the transition period, American has continued to occupy all of the space leased by the previously separate American and US Airways operations. Once combined, the new American space will be reduced in size.

A Terminal Optimization Study was completed in 2012 that provided analysis of the adequacy and layout of existing terminal facility space including security checkpoints, concession space and mechanical systems, as well as outbound baggage systems. The study included development of a preferred design concept that will utilize existing vacant ticket counter lobby space for new and expanded security checkpoints. The plan also calls for significant additional terminal square footage to be made available for revenue generating post-security concessions opportunities. The recommendations also included ways to consolidate Authority staff within the terminal complex and make the Authority’s then Administration Building and a portion of another building near the terminal available for lease to third parties. Construction of the Authority’s new administrative office space in the terminal building was completed during FY 2015 and staff occupied the space beginning in October 2015. Construction on the remaining components of the Terminal Optimization Project will commence in FY 2016.

In June 2015, the Authority and its commercial real estate broker CBRE, completed a review of several vacant and underutilized commercial buildings at TIA in order to determine highest and best use, repairs and maintenance needed to improve marketability and prioritize leasing efforts. Numerous maintenance projects have been completed and are ongoing. To raise awareness of leasing opportunities available at TIA, a gathering of local commercial real estate brokers was hosted by the Authority at its recently vacated former Administration Building. A tour of other available properties was also conducted.

An update to the General Aviation (GA) Strategic Plan for TIA was completed in FY 2014. The plan, which is available for viewing on the Authority’s website, flytucson.com, provides a guide for GA growth at TIA including recommendations for managing and developing GA activities at TIA for the next ten years. Actions completed in FY 2015 in GA Area B-1 included creation of a 24-hour GA pilot lounge, hangar and taxi lane lighting improvements, GA community information boards and T-hangar exterior painting. Detailed planning began in FY 2015 for longer-term projects, including upgrading


INTRODUCTION 9

of wash rack facilities, encouraging private development of executive hangars to more closely match hangar types with the projected GA based-aircraft mix, and making space available for expansion of private FBO facilities.

The Authority sold land to the County in FY 2015 south of TIA for the relocation of Hughes Access Road. The new road was completed in December 2015 and renamed Aerospace Parkway. The new road is the first phase of a plan to create a high-speed bypass road connecting Interstate 19 with Interstate 10, the Port of Tucson and the University of Arizona Tech Park. The Authority, the County and other local economic development stakeholders are working toward development of the area surrounding the new Aerospace Parkway into a business park that will be ideally suited for large-scale manufacturing companies, as well as transportation, distribution and logistics companies. With significant land holdings in the corridor, the Authority is positioned to benefit substantially from potential non-airline revenue from land leases.

A key business objective of the Authority is to retain passengers who live in the Tucson area and prevent leakage to other airports. Making use of TIA a pleasurable, convenient and low-stress experience is an important part of achieving this objective. In order to measure our level of success, annual passenger intercept surveys were introduced in 2013, conducted in a scientific manner by a professional survey company to be statistically accurate. The third survey conducted in FY 2015 continued to show impressive results that have been achieved since the initial survey. In the 2015 survey, 98.4% of those surveyed were satisfied with their overall experience at TIA as compared to other airports.

Financial Policies and Practices

INTERNAL CONTROL ENVIRONMENT

The Authority is responsible for establishing and maintaining internal controls designed to ensure that its assets are protected from loss, theft or misuse, and to ensure that adequate accounting data is compiled to allow for preparation of financial statements in conformity with GAAP. Internal controls are designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived, and the valuation of costs and benefits requires estimates and judgments by management.

As a recipient of federal and state financial assistance, the Authority is also responsible for ensuring that adequate internal controls are in place for documenting compliance with applicable laws and regulations related to these programs. This internal control is subject to periodic evaluation by management, internal audit staff and external independent accountants.

In addition, the Authority maintains extensive budgetary controls. The objective of these controls is to ensure compliance with various legal and regulatory provisions such as grant assurances and FAA regulations, as well as to ensure funds are expended according to management’s direction.

BUDGETARY CONTROLS

An annual budget is prepared on a residual cost basis as established by Section 5.03(a) of the Airport Use Agreement dated April 27, 1977 for all accounts and funds established by the agreement. The annual budget serves as a foundation for the Authority’s financial planning and control. All appropriations with the exception of those for open project accounts lapse at the end of each fiscal year. Since there is no legal requirement for the Authority to report on a budgetary basis, no additional budget information is presented in the accompanying financial statements.

Section 4 of the City of Tucson Agreement (Lease) dated October 14, 1948 requires the Authority to present a biennial version of the budget to the Mayor and City Council for information purposes. The annual budget is approved by the Board prior to its implementation and, in accordance with the Airport Use Agreement, is presented to the Airline Affairs Committee for review, but not approval.

The “residual cost” approach forms the basis of the Authority’s contractual relationship with signatory airlines. This approach is common, but not universal, among U.S. airport operators. It is a methodology that encompasses the following concepts:

Residual Cost — a method of determining which costs are the responsibility of the airlines as payment to the Authority for providing, operating and managing the airport system (TIA and Ryan). The result is coverage of all Authority operating



Financial Policies and Practices (continued)

BUDGETARY CONTROLS (continued)

and managing the airport system (TIA and Ryan). The result is coverage of all Authority operating and capital improvement costs on a break-even basis.

Airline Reserve Fund - the excess, if any, of revenues over costs calculated in accordance with the Airport Use Agreement at the end of each year.

Long-term Agreements - a common feature of residual cost contracts. The Authority’s current agreement was executed in 1977 with an original expiration date of September 30, 2006. Through several extensions, the agreement’s current expiration date is September 30, 2016, with options to extend for two additional one-year periods. In recent years, the average length of most residual airport use agreements has decreased, with three to five years becoming more common.

Majority-In-Interest (MII) - a voting formula used by the signatory airlines in considering approval of significant capital expenditures and use of Airline Reserve Fund monies. The use agreement defines MII as a numerical majority of the signatory airlines that represent more than 50% of the total landed weight at the airport.

Exclusive Rights - rights provided to individual airlines through the Airport Use Agreement for the use of exclusive space to accommodate their operations and paid for in the form of rents.

Preferential Rights - rights provided to individual airlines through the Airport Use Agreement for the use of leased gate and holdroom space to accommodate their operations and paid for in the form of rents. The preferential rights concept was introduced at TIA with the recent use agreement extensions in order to allow the Authority more flexibility to accommodate future growth in air service.

Joint (or common use) Rights - rights provided to individual airlines for use of space in common with other users to provide baggage claim facilities and certain gate areas paid for in the form of rents.

To provide financial resources adequate to meet the Authority’s needs, the Airport Use Agreement includes a formula for the calculation of rates and charges, including landing fees. This formula, the “Airport System Income Requirement,” serves as a template in creating the annual budget, and is commonly referred to simply as the “Airport System.” The formula consists of four elements:

• Operation and Maintenance Expenses - in addition to day-to-day operating requirements, this item provides for capital needs, short-term debt obligations, and any other requirements not included elsewhere in the formula.

• Debt Service Requirements - includes 125% of the principal and interest payments due in accordance with senior lien revenue bond resolutions and debt amortization schedules. The 25% excess is called “coverage.” For subordinate lien revenue bonds where other revenue sources such as PFCs are not pledged for debt service, the excess coverage requirement is 10%. Providing coverage fulfills a covenant in the bond resolutions that requires this surplus as assurance to bond holders that adequate funds will be available to pay debt service requirements on a timely basis. In the normal course of business, the coverage is not needed and it flows through the airport system.

• Fund Replenishments - provides for the funding and refunding of the various reserve funds required by the Authority’s senior and subordinate lien bond resolutions and the Airport Use Agreement.

• Adjustments - 100% of operating income flows through the airport system. At year-end, certain revenues defined in the use agreement are transferred out of the airport system into the Special Reserve Fund and are excluded from the residual cost calculation. These revenues include:

• 52% of the net income generated from designated “industrial area” developments, which are geographic locations at TIA.

• Interest income earned from the investment of monies accumulated in the Special Reserve Fund and Insurance Reserve Fund.

INTRODUCTION 11

Together, these four elements (Debt Service, Operations & Maintenance, Fund Replenishment, and Adjustments) comprise the “Total Gross Requirement.” This requirement is then reduced by all of the available resources that include:

• Operating income.

• Beginning cash balance that is the coverage from the prior year, adjusted by any overage or shortfall from operations.

The net amount resulting from this calculation is the residual amount that is used to calculate landing fees required to be paid by the signatory airlines in order to “balance” the budget.

LONG-TERM FINANCIAL PLANNING

One of the tools the Authority uses for long-term planning is the Master Plan, which was last updated for TIA in 2013. This document is prepared with the input of Authority staff, the signatory airlines and other key tenants and stakeholders. The Master Plan projects airport growth and then specifies the physical improvements that are needed to meet these projections of future demand. It consists of a technical report that specifies the logic and reasoning for the proposed capital improvements as well as large scale drawings that illustrate the physical layout of the improvements. The financial implications of a master plan are very important because they serve as the basis for requesting federal funds for the construction of capital improvements proposed in the plan. The Authority’s most recent update of the Master Plan provides a flexible and cost-effective guide for the future development of TIA through the year 2030. Capital improvements recommended by the plan are demand-driven. This means that although there are a large number of projects proposed by the plan, only those that are needed as a result of actual increase in demand will be constructed. The most recent Master Plan Update for Ryan was completed in 2011. The plan is available for viewing on the Authority’s website, flytucson.com.

The airport master plans form the basis for a multi-year capital improvement plan, which is updated on a regular basis. The plan typically contains at least five years of projections, longer if necessary for a particular need such as a bond-financing project or airline use agreement negotiations. Capital improvement plan assumptions are based on the best information available of needs on a project-by-project basis extending through the planning horizon.

CASH MANAGEMENT AND INVESTMENTS

The Authority invests cash as permitted under the Amended and Restated Senior Lien Airport Revenue Bond Resolution dated November 28, 2006, and according to internal policies and applicable state statutes. The single most important objective under these policies is to preserve the principal of funds within the portfolio. The portfolio is managed to ensure that funds are available as needed to meet immediate and projected future operating requirements and to maximize the return on investments within the constraints of the resolutions, policies and state statutes.

While other forms of investments are permitted, cash is most commonly invested in direct obligations of, or obligations guaranteed by the United States of America and obligations of specific agencies of the United States of America. Funds awaiting investment are held in U.S. government security money market funds. Investments are insured, registered or held by a trustee in the Authority’s name.

At September 30, 2015, the investments held by the Authority yielded interest ranging from 0.255% to 1.773% and mature on various dates through January 9, 2020. The operating portfolio balance, at cost, was $115.5 million with an average yield to maturity of 1.027% and average days to maturity of 810.

Additional detailed information on cash and investments may be found in the financial section (Note 3) of this report.

CAPITAL FINANCING AND DEBT MANAGEMENT

Capital improvements that require long-term financing are typically funded using either Authority reserves or airport revenue bonds. Unrestricted Special Reserve Fund balances that are the result of the sharing of industrial area revenues with airline tenants, as described in the budgetary controls section of this letter, give the Authority considerable flexibility in financing capital improvements. The most significant benefit is that the Authority’s share (amounts not reimbursed with grants or passenger facility charges) of most capital improvements is financed internally rather than through issuance of airport revenue bonds. This practice avoids bond issuance and interest costs, creates administrative efficiencies, and



CAPITAL FINANCING AND DEBT MANAGEMENT (continued)

results in a lower total cost of financing for airline tenants. Reserve funds are restored as the costs of improvements are amortized, with interest, over their useful lives and paid back to the Authority by the airline tenants through rates and charges.

Capital expenditures for FY 2015 were financed through a combination of federal and state grants, internal financing from unrestricted reserve funds, and funds generated through the Airport System Income Requirement formula.

The Authority purchased bond insurance on its outstanding subordinate lien revenue bonds in order to enhance the credit rating at the time of issuance. Credit market turmoil during the U.S. economic downturn that began in 2008 resulted in a series of downgrades of credit insurers by the three major U.S. credit rating agencies. Due to these insurer downgrades, the Authority’s current insured bond ratings are now equivalent to the underlying credit rating, which is based solely on the rating companies’ assessments of the Authority’s financial strength. The following table summarizes the insured and underlying credit ratings of the Authority’s outstanding revenue bonds at the time of issue and as of March 2016:

Detailed information on long-term debt may be found in the financial section (Note 7) of this report.

RISK MANAGEMENT

It is the objective of the Authority to reduce or transfer risk where possible through a comprehensive insurance program and through various other means. One aspect of this is managed through the ongoing development and implementation of an effective safety program. The program is managed through a safety committee with representatives from the major work areas. The committee plans and implements proactive safety programs, identifies unsafe conditions, recommends remedial actions, monitors progress, and creates and maintains a library of materials that is available to departments for use in safety training. The Authority also structures its contractual relationships in such a manner as to transfer risk to the parties responsible for losses.

In partnership with its health insurer, the Authority also maintains an active employee wellness program to help increase the overall health and wellness of its workforce and their families. These efforts help to control health insurance claim costs and reduce absenteeism. An employee Wellness Committee, with financial and staff support from the Authority’s insurer, conducts an annual Safety and Wellness Fair, as well as various events, contests, workshops, and wellness coaching sessions throughout the year.

PENSION AND OTHER POST-EMPLOYMENT BENEFITS

The Authority participates in the Arizona State Retirement System (ASRS), which is a pension system for public employees in the State of Arizona. The State administers this defined benefit plan in accordance with Title 38, Chapter 5 of the Arizona Revised Statutes and it is overseen by a nine member board. Participation in ASRS is mandatory and automatic for all regular full-time Authority employees (excluding fire and police personnel) at the time of employment.


Ratings at Issue Date March 2015 Ratings Issue/Rating Agency Bond Insurer Insured Underlying Insured Underlying

2001 Subordinate Ambac Moody’s Aaa A3 * A2 Fitch AAA A * A Standard & Poor’s AAA A- * *

2006 Subordinate MBIA Moody’s Aaa A2 B3 A2 Fitch AAA A * A Standard & Poor’s # # # #

* - rating withdrawn # - not rated

INTRODUCTION 13

The plan provides pension, long-term disability and death benefits, as well as a retirement health care premium subsidy. The Authority and covered employees are required to contribute at actuarially determined rates.

The Authority also provides retirement benefits to all full-time fire and police employees through the Arizona Public Safety Personnel Retirement System (ASPRS). This is also a defined benefit plan where the Authority and covered employees are required to contribute at actuarially determined rates. In addition to pension and disability benefits, this plan also offers a retirement health insurance premium subsidy.

Detailed information on the pension plans may be found in the financial section (Notes 2, 8 and 16 and the required supplementary information) of this report.

COMMUNITY INVOLVEMENT

As the primary gateway to the region, the Authority is committed to ensuring a positive first and last impression for visitors and a stress-free as possible experience for all travelers, including residents of southern Arizona. Not only are there strong air service options, Tucson International Airport’s facilities and amenities provide a comfortable respite for the traveler with changing exhibits in five art galleries inside the terminal and three designated performance areas used by local entertainers as part of the performing arts program, Live@TIA. Last year, the airport hosted 18 exhibits featuring more than 90 artists. As part of TAA’s community outreach efforts, the airport partnered with nonprofit organizations including Arizona State Parks, Children’s Museum Tucson, International Wildlife Museum, Kitt Peak Observatory, Mini Time Machine Museum, Old Tucson Studios, Pima Air & Space Museum, Reid Park Zoo, Saguaro National Park, Southern Arizona Attractions Alliance, Tohono Chul Park, Tombstone Courthouse, Tucson Botanical Gardens, Tucson Symphony, Tucson Museum of Art, Tucson Jazz Society, as well as economic and educational partners like Presido San Agustin del Tucson, Tucson Audubon Society, University of Arizona’s Accelerator Mass Spectrometry Laboratory, Biospere 2 and College of Science, Southern Arizona Buffelgrass Coordination Center, Pima Community College’s Louis Carlos Bernal Gallery, Tucson Regional Economic Opportunities (now Sun Corridor), Tucson Rodeo Parade Museum and Visit Tucson to create exhibits seen by airport users. The performing arts program, Live@TIA, schedules a performance almost every Thursday, Friday and Saturday evenings with occasional performances on Sunday nights.

The Federal Aviation Administration (FAA) substantially completed construction on a new 250-foot tall air traffic control tower on six acres of land leased from the Authority on the southwest side of the airport. Installation of equipment is ongoing and expected to be completed in 2016. The new tower complex includes a 13,000 square-foot base building that will house computer equipment, administrative offices and a back-up power system that is designed to automatically activate in case of a commercial power outage. Numerous environmental features will minimize the facility’s energy and water uses. A 1,600-panel solar farm adjacent to the base building is expected to generate all of the facility’s electrical needs for several hours a day on sunny days. At other times, the power it produces will supplement the facility’s commercial power supply. The total project cost, including computer equipment, electronics, fire suppression systems, and heating and air conditioning, is about $42 million.

The Authority continued its green initiatives in FY 2015 with several projects. Incandescent medium intensity runway lights on Runway 3/21were replaced with energy efficient LED lights. Refurbishment of the heat exchanger unit in the main terminal central plan HVAC system will save energy by allowing utilization of external air to help cool the terminal building. Energy for trash transportation will also be saved due to the installation of an on-site incinerator at TIA for disposal of regulated garbage. This includes items such as food scraps, table refuse, galley refuse, food wrappers, packaging materials and other waste material from international aircraft arrivals. Previously, TIA’s regulated garbage was collected by a contractor and transported to Phoenix for treatment and disposal.

Authority employees are actively engaged in civic and charitable activities in the community. Some of those efforts in 2015 included events to collect donated items and raise funds for Toys for Tots, Special Olympics, Trees for Tucson, Casa de Los Niños, Youth On Their Own, Save the Horses, Primavera Foundation, Boys and Girls Club, Fisher House and Arizona Greyhound Rescue. In addition to the donated items, these events raised over $9,000 in cash for the various charities. AECE also organizes quarterly Red Cross blood drives at TIA and worked with the Bone Marrow Foundation on a bone marrow donor drive. Authority employees also collect unopened beverages and toiletries surrendered at TSA security checkpoints for donation to Primavera Foundation, which helps people transition from poverty.

In October 2015, the first ever “Fly SAAFE (Southern Arizona Autism Flight Event)” program was held at TIA in partnership with the Tucson Alliance for Autism, the Transportation Security Administration, American Airlines and

Other Information


Liberty Center for Language and Learning, LLC. The event provided families who have a child or children with Autism Spectrum Disorder (ASD), the opportunity to have a “curb-to-plane” experience at the airport to be better prepared for travel. The flight rehearsal provided families the opportunity to simulate the steps involved in traveling through an airport, including airport parking, entering the airport, checking a bag, going through security, waiting at the gate, boarding the airplane, preflight safety, exiting the airplane, collecting their bag at baggage claim and departing the airport. This program is beneficial for children with autism as it allows the child to go through the airport and airplane boarding process at their own pace, helping them to process what’s going on and learning what to expect.

REQUESTS FOR INFORMATION

This financial report, along with the audited financial statements, is designed to provide a general overview of the Tucson Airport Authority. Questions concerning the information contained in this report should be addressed to the Tucson Airport Authority Administration and Finance Department, 7250 S. Tucson Blvd., Suite 300, Tucson, Arizona 85756.

AWARDS AND ACKNOWLEDGEMENTS

The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Authority for its CAFR for the fiscal year ended September 30, 2014. This was the 21st consecutive year that the Authority achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized CAFR. This report must satisfy both GAAP and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. This report will continue to be offered in a PDF format, allowing the user to download it and save, print or view it online at the airport website, www.flytucson.com.

The publication of this CAFR is a reflection of the level of excellence and professionalism of the Authority’s Finance Department. In addition to the Finance Department, we wish to express our appreciation to all members of the Authority staff, who contributed not only to the preparation of this CAFR, but also to the accomplishments that we are privileged to report.

We also wish to thank each of you for your continuing interest and support of the staff’s efforts to conduct the financial operations of the Tucson Airport Authority in a responsible and progressive manner.

Respectfully submitted,

Bonnie A. Allin, A.A.E. Richard J. Gruentzel, C.M.President/Chief Executive Officer Vice President, Administration & Finance/CFO

Other Information (continued)

INTRODUCTION 15


Organizational Structure

General Counsel

Sarah Meadows

Vice PresidentAdministration & Finance/CFO

Richard Gruentzel

Vice PresidentOperations & Projects/COO

Danette Bewley

Internal Audit

Properties/ConcessionsGround Transportation

Finance/Accounting

Information Technology

Administrative Services/Team Member Services

and Development/ Contracting/Procurement/

Records Management

Business Development/ Marketing/Public Information/

Government Affairs

Safety Programs

Public Safety

Airside Operations& Communications

Executive Assistant

Linda Mabry

Board of Directors

President & CEO

Bonnie Allin

Maintenance &Custodial Services

Development Services - Planning - Env. Services

Programs & RegulatoryCompliance

INTRODUCTION 17

PASSENGER AIRLINES

Alaska Airlines

American Airlines

Delta Air Lines

Mesa Airlines

Sierra Pacific

SkyWest Airlines

Southwest Airlines

United Airlines

CARGO AIRLINES

Ameriflight

Federal Express

CAR RENTALS

Alamo

Avis

Budget

Dollar

Enterprise

Hertz

National

Payless

RYAN AIRFIELD

Aero Smith

Air Center West

Aircrafters

Air Ventures Ltd.

Alpha Air, Inc.

B.B.S. Investment

Cherokee Cabañas

Corsair Condos

Hangar 31 Aircraft Services, LLC

Jim’s Aircraft

Kelly’s Aviation

Mobile Aire Hangars

Pima County

Todd’s Place Restaurant

Tucson Upholstery

Tyconic, Inc.

United Indian Missions

Velocity Air, Inc.

TUCSON INTERNATIONAL AIRPORT

AT&T

AAA Airport Cabs, LLC

A.E. Petsche Company, Inc.

Ace Parking Management, Inc.

AERGO-TUS, LLC

Aerospace Hangar, LLC

Aerovation

Airport Information Centre

Amalong, Terry

Apple Autos

Arizona Aero-Tech

Arizona Air National Guard

Arizona Aviation Associates

Arizona Stagecoach

Ascent Aviation Services

Ashton Company

Atlantic Aviation

Bank of America

Birdman Air Enterprises, Inc.

Bombardier Aerospace/Learjet Inc.

Broward Aviation

City of Tucson

Civil Air Patrol

Clear Channel – Interspace Airport Advertising

Delta Global Logistics

Discount Cab

Double Eagle Aviation Flight School

Federal Aviation Administration

Flash Cab, LLC

FlightSafety International, Inc.

GA Telesis, LLC

General Airframe Support

General Services Administration

Global Flight Relief

Good-Men Roofing and Construction, Inc.

Gordon Engineering, Inc.

Granite Construction Company

Great American Shoe Shine Co.

Airlines and Tenants As Of September 30, 2015

Handy Hangars

HIDTA-AZ

Hughes Federal Credit Union

Lan-Dale Co.

Latrikunda Transport Services, LLC

Luggage Services & Logistics

Matheson Flight Extenders, Inc.

Max Air

Med-Trans Corp./Air Evac EMS, Inc.

Metal Works

Military Liaison Office

Million Air

OTG Management, Inc.

Paradies - Desert House

Pickens Fuel Corporation

Pima Community College

Pizza Hut, Inc.

Premier Aviation

Prospect International Airport Services, Inc.

Real Air Hangar, Inc.

Raytheon Missile Systems

Simplicity Ground Services

Smarte Carte, Inc.

Sonoran Wings Flight Training Centre, Inc.

Southwest Airport Services

SOS Security

Southwest Heliservices

Spirit Aviation

Suarez International, Inc.

Surplus World

Taco Bron

Transportation Security Administration

Tucson Fuel Facilities, LLC

Tucson Jet Center

Tucson Police Department

University of Arizona Environmental Research Lab

Universal Avionics

U.S. Customs & Border Protection

U.S. REIF Tucson Commerce Center

Velocity Air

Verizon Wireless

Victor II, Ltd.

Wright Flight, Inc.

WiMacTel

Yellow Cab

FINANCIALS 19

Board of Directors Tucson Airport Authority, Inc. Tucson, Arizona

We have audited the accompanying financial statements of Tucson Airport Authority, Inc., which comprise the statements of net position as of September 30, 2015 and 2014, and the related statements of revenues, expenses and changes in net position and cash flows for the years then ended and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards established by the AICPA Auditing Standards Board and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Organization’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Organization’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Tucson Airport Authority, Inc. as of September 30, 2015 and 2014, and the changes in its net position and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

Change in Accounting Principle

As discussed in note 2, in 2015 the Authority adopted new accounting guidance, GASB Statement No. 68, Accounting and Financial Reporting for Pensions, as amended by GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date. Our opinion is not modified with respect to this matter.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated March 30, 2016 on our consideration of Tucson Airport Authority’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Tucson Airport Authority‘s internal control over financial reporting and compliance.

Independent Auditors’ Report


Required Supplementary Information

U.S. generally accepted auditing standards require that the management’s discussion and analysis, schedule of the Authority’s proportionate share of the net pension liability - cost sharing plan (ASRS), multiyear schedule of changes in net pension liability (Asset) and related ratios agent retirement plan (PSPRS) - Fire Department, multiyear schedule of changes in net pension liability (Asset) and related ratios agent retirement plan (PSPRS) - Police Department and multiyear schedule of pension contributions as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with U.S. generally accepted auditing standards, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Authority’s basic financial statements. The introductory and statistical sections listed in the table of contents are presented for purposes of additional analysis and are not required parts of the basic financial statements. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them.

Tucson, Arizona April 28, 2016

Independent Auditors’ Report (continued)

FINANCIALS 21

The following discussion and analysis of the financial performance and activity of the Tucson Airport Authority, Inc. (Authority) provides an introduction to the Authority’s financial statements for the fiscal year ended September 30, 2015 (FY 2015). Information for the two preceding fiscal years ended September 30, 2014 and 2013 (FY 2014 and FY 2013) has been included to provide a better insight into the overall financial position of the Authority.

The Authority is a business-type activity and, as such, the Basic Financial Statements and Required Supplementary Information (RSI) consists of Management’s Discussion and Analysis (MD&A), the Statements of Net Position, the Statements of Revenues, Expenses and Changes in Net Position, the Statements of Cash Flows, and the Notes to Financial Statements. This MD&A has been prepared by management and should be read and considered in conjunction with the Authority’s basic financial statements.

AIRPORT ACTIVITIES & HIGHLIGHTS

Passenger and air carrier activity decreased each fiscal year at the Tucson International Airport (TIA) from FY 2013 to FY 2015. Total passengers decreased by 1.8% for FY 2015, which followed decreases of 2.1% for FY 2014 and 9.3% for FY 2013. Daily nonstop departures decreased by 3 to 47 at the end of FY 2015 from 50 at the end of FY 2014, which followed a decrease of two departures from the previous year end. Daily nonstop departures are impacted by seasonal airline scheduling and vary from month-to-month. The average daily seat capacity in FY 2015 was a 2.8% decline over FY 2014, which followed a decrease of 2.6% in FY 2014 compared to FY 2013. The declines in passenger numbers over the last three years are largely driven by the decreases in airline seat capacity. Airline seat capacity changes at TIA have been affected by changes in airline business models due to mergers and industry consolidation, lack of new entrant carriers, and emphasis on profitability. These factors have combined to result in airlines adding flights that are perceived as being less risky between larger airports and cutting back on flights at small and medium sized airports like TIA.

Total aircraft operations (take-offs and landings) at TIA increased 1.4% in FY 2015 after increasing .8% in FY 2014 and decreasing 4.8% in FY 2013. Total FY 2015 operations were comprised of 64,622 general aviation operations, 48,750 air carrier and air taxi (passenger airline, cargo airline, and charter) operations and 28,050 military operations. In contrast to air carrier and air taxi operations that generate landing fee revenue, general aviation and military operations do not directly generate revenue for the Authority. The largest change in operations for FY 2015 was military operations, which increased by 3,357 (13.6%). The primary changes in total aircraft operations in FY 2014 compared to FY 2013 were in air carrier and air taxi operations, which decreased by 2.3% and general aviation operations which increased by 4.5%. The decrease in air carrier and air taxi operations was due primarily to the reduction in daily departures discussed above. The increase in general aviation operations is likely associated with improvements in the overall economy.

Landed weight decreased by 2.3% in FY 2015 from FY 2014 to 1,897,216 one thousand pound units, after decreasing by 4.0% in FY 2014 and decreasing 10.7% in FY 2013. The changes have been caused by variations in passenger carrier air service through a combination of increases and/or decreases in flights and the size of aircraft used for flights.

Mail and express cargo shipments increased by 2.1% in FY 2015 from FY 2014, following a decrease of 5.2% in FY 2014 and a decrease of 4.3% in FY 2013. The changes in mail and express cargo shipments in each of these years were primarily a result of changes experienced by Federal Express, the single major cargo carrier operating at TIA.

Six major domestic passenger carriers served TIA as of September 30, for each year 2013 – 2015. Southwest Airlines and American Airlines have dominated in both passenger activity and landed weight over the three reporting periods. These two carriers accounted for 59.5% of passenger traffic in FY 2015, 58.7% in FY 2014 and 60.6% in FY 2013.

Management’s Discussion and AnalysisSeptember 30, 2015


Activities & Highlights 2015 2014 2013Total passengers 3,181,901 3,239,849 3,308,620 % increase/decrease(-) -1.8% -2.1% -9.3%

Average daily seat capacity 5,270 5,420 5,562 % increase/decrease(-) -2.8% -2.6% -9.9%

Aircraft operations 141,422 139,420 138,263 % increase/decrease(-) 1.4% 0.8% -4.8%

Landed weight (1,000 lb. Units) 1,897,126 1,941,816 2,023,646 % increase/decrease(-) -2.3% -4.0% -10.7%

Mail & express cargo (pounds) 66,184,562 64,796,533 68,359,820 % increase/decrease(-) 2.1% -5.2% -4.3%

AIRPORT ACTIVITIES & HIGHLIGHTS (continued)

Management’s Discussion and Analysis (continued)September 30, 2015

Passengers by Airline (Thousands)

2015 2014 2013

1,400

1,200

1,000

800

600

400

200

0 Southwest American United US Airways Delta Alaska

Total Passengers and Landed Weight (Thousands)

Passengers Landed Weight

4,000

3,500

3,000

2,500

2,000

1,500

1,000 2015 2014 2013

FINANCIALS 23


AIRPORT ACTIVITIES & HIGHLIGHTS (continued)

Operations by Type (Thousands)

2015 2014 2013

80

40

0 Air Carrier Air Taxi Military General Aviation

Landed Weight by Airline (Thousands)

2015 2014 2013

800

600

400

200

0 Southwest American US Airways United Delta Federal Others Express

Aircraft Operations (Thousands)

145

140

135

130

125 2015 2014 2013


Summary of Operations and Changes in Net Position 2015 2014 2013 Operating revenues $ 41,986,785 $ 41,350,858 $ 42,594,975 Operating expenses 28,389,788 31,512,439 28,555,886 Operating income before depreciation & amortization 13,596,997 9,838,419 14,039,089 Depreciation & amortization 16,577,216 15,860,805 16,472,711 Operating income (2,980,219) (6,022,386) (2,433,622) Non-operating revenues 7,970,529 7,794,882 6,461,038 Non-operating expenses (3,089,268) (3,907,822) (4,533,723) Income (loss) before capital contributions and special item 1,901,042 (2,135,327) (506,307) Capital contributions 15,074,095 26,622,392 13,542,280 Increase in net position $ 16,975,137 $ 24,487,065 $ 13,035,973

Total operating revenues increased $.6 million (1.5%) in FY 2015 over FY 2014 and decreased $1.2 million (2.9%) in FY 2014 over FY 2013. Increases in operating revenues in FY 2015 were primarily related to delays in the consolidation of airport operations of American Airlines and US Airways, as US Airways operated under a nonsignatory agreement in FY 2015 at a higher space rental rate. Decreases in operating revenues in FY 2014 and FY 2013 included decreases in fueling fees and product sales as TAA discontinued commercial carrier and general aviation fueling operations.

FY 2015 operating expenses decreased by $3.1 million (9.9%) over FY 2014, primarily due to a reduction in pension expense. FY 2014 operating expenses increased by $3.0 million (10.4%) over FY 2013, primarily due to higher pension expense, partially offset by lower cost of product sales due to transferring airline and general aviation fueling operations to private operators and lower professional fees.

Non-operating revenues in FY 2015 and FY 2014 increased 2.3% and increased 20.6%, respectively, compared to FY 2014 and FY 2013. This was mainly due to fluctuations in passenger facility charge revenue, interest income on investments and gains on disposition of fixed assets. Non-operating expenses decreased in FY 2015 and FY 2014 by 20.9% and 13.8% respectively. The FY 2015 decrease was due primarily to a reduction in environmental expense of $.7 million. The FY 2014 decrease was due primarily to a reduction in environmental expense of $.3 million and interest expense of $.3 million.

Capital contributions in FY 2015 decreased by 43.4% from FY 2014 and FY 2014 capital contributions increased by 96.6% over FY 2013. Year-to-year variances in capital contributions are determined by factors such as grant availability and project timing.

SUMMARY OF OPERATIONS AND CHANGES IN NET POSITION


FINANCIAL HIGHLIGHTS

The Authority’s assets and deferred outflows exceeded liabilities and deferred inflows at the end of FY 2015 by $342.6 million, compared to $325.7 million and $301.1 million at the end of FY 2014 and FY 2013, respectively. Unrestricted net position for fiscal years 2015, 2014 and 2013 was $58.5 million, $54.8 million, and $47.6 million, respectively.

The Authority experienced a smaller increase in net position for FY 2015 over FY 2014 primarily as a result of a decrease in capital contributions of $11.5 million. The Authority experienced a larger increase in net position for FY 2014 over FY 2013 primarily as a result of an increase in capital contributions of $13.1 million.

The Authority’s total long-term liabilities, net of the current portion, decreased by $3.1 million in FY 2015 over FY 2014 and decreased by $2.0 million in FY 2014 over FY 2013. These changes reflect increases or decreases in the net pension liability reduced by scheduled debt service payments.

FINANCIALS 25

Increase % Increase Summary of Net Position 2015 2014 (decrease) decrease (-)Assets Current (unrestricted) $ 133,439,870 $ 127,875,330 $ 5,564,540 4.7%Current (restricted) 37,853,181 35,689,811 2,163,370 6.1%Net capital assets 301,385,318 293,319,305 8,066,013 2.7%Other noncurrent assets 53,970 65,910 (11,940) -18.1% Total assets 472,732,339 456,950,326 15,781,983 3.5%Deferred outflows of resources 3,753,950 4,400,998 (647,048) -14.7% Total assets & deferred outflows of resources 476,486,289 461,351,354 15,134,935 3.3% Liabilities Current (payable from unrestricted assets) 16,825,036 14,115,023 2,710,013 19.2%Current (payable from restricted assets) 1,142,810 1,452,759 (309,949) -21.3%Noncurrent 113,038,313 116,157,720 (3,119,407) -2.7% Total liabilities 131,006,159 131,725,502 (719,343) -0.5%Deferred outflows of resources 2,850,244 3,971,103 (1,120,859) -28.2% Total assets & deferred inflows of resources 133,856,403 135,696,605 (1,840,202) -28.8% Net position Net investment in capital assets 247,391,638 236,631,507 10,760,131 4.5%Restricted 36,709,046 34,237,052 2,471,994 7.2%Unrestricted 58,529,202 54,786,190 3,743,012 6.8% Total net position $ 342,629,886 $ 325,654,749 $ 16,975,137 5.2%


FINANCIAL POSITION


Current unrestricted assets increased in FY 2015 over FY 2014 by $ 5.6 million and in FY 2014 over FY 2013 by $9.2 million due mainly to higher cash and investment balances. Current restricted assets increased by $2.2 million in FY 2015 compared to FY 2014 and increased by $.4 million in FY 2014 compared to FY 2013. Both of these variances were favorably impacted by increases in the Passenger Facility Charge (PFC) Fund as cash accumulates for future debt service on PFC-backed bonds, offset by reductions in bond debt service funds for retired bonds and decreases in assets restricted for environmental remediation liabilities. Net capital assets increased by $8.1 million in FY 2015 over FY 2014 and increased by $13.5 million in FY 2014 over FY 2013, both years being impacted by projects in the Authority’s capital improvement program.

Current liabilities payable from unrestricted assets increased by $2.7 million in FY 2015 compared to FY 2014 due primarily to an increase in operating accounts payable, accrued expenses and environmental remediation payable, partially offset by reduced construction contracts payable. Current liabilities payable from unrestricted assets increased by $1.9 million in FY 2014 compared to FY 2013 due primarily to an increase in construction accounts payable and environmental remediation expenses payable, partially offset by reduced bonds payable. Total noncurrent liabilities decreased by $3.1 million in FY 2015 compared to FY 2014 and decreased by $2.0 million in FY 2014 compared to FY 2013. The FY 2015 decrease was primarily due to normal debt service, while the increase for FY 2014 largely related to the initial recording of net pension liability under new accounting standards of $38.7 reduced by normal debt service.

The largest portion of the Authority’s net position, 72.2% for FY 2015, 72.7% for FY 2014, and 73.2% for FY 2013,


FINANCIAL POSITION (continued)

Increase % Increase Summary of Net Position 2014 2013 (decrease) decrease (-)Assets Current (unrestricted) $ 127,875,330 $ 118,711,184 $ 9,164,146 7.7%Current (restricted) 35,689,811 35,298,604 391,207 1.1%Net capital assets 293,319,305 279,831,061 13,488,244 4.8%Other noncurrent assets 65,910 76,964 (11,054) -14.4% Total assets 456,950,356 433,917,813 23,032,543 5.3% Deferred outflows of resources 4,400,998 692,399 3,708,599 535.6% Total assets & outflows of resources 461,351,354 434,610,212 26,741,142 6.2% Liabilities Current (payable from unrestricted assets) 14,115,023 12,209,655 1,905,368 15.6%Current (payable from restricted assets) 1,452,759 3,043,309 (1,590,550) -52.3%Noncurrent 116,157,720 118,189,564 (2,031,844) -1.7% Total liabilities 131,725,502 133,442,528 (1,717,026) -1.3%Deferred inflows of resources 3,971,103 - 3,971,103 100.0% Total assets & inflows of resources 135,696,605 133,442,528 2,254,077 1.7% Net position Net investment in capital assets 236,631,507 220,572,537 16,058,970 7.3%Restricted 34,237,052 32,995,120 1,241,932 3.8%Unrestricted 54,786,190 47,600,027 7,186,163 15.1% Total net position $ 325,654,749 $ 301,167,684 $ 24,487,065 8.1%

FINANCIALS 27


represents its investment in capital assets (e.g. land, buildings, machinery and equipment), less outstanding debt used to acquire those assets. A prior period adjustment was made to increase the net investment in capital assets by $.3 million to correct the accounting for certain studies, plans and intangible assets. Details for this prior period adjustment may be found in Note 15 to the financial statements. The Authority uses these assets to provide services to its passengers, visitors and tenants that generate future revenue streams. Although the Authority’s investment in its capital assets is reported net of related debt, the resources needed to repay this debt must be provided from operations, since the capital assets themselves cannot be used to retire these liabilities.

An additional portion of the Authority’s net position, 10.7% for FY 2015, and 10.5% for FY 2014 and 11.0% FY 2013, represents resources that are subject to restrictions from government grantors, bond resolutions and State and Federal regulators on how they may be used. The changes in restricted net position over the three-year period are primarily attributable to passenger facility charge funds that are accumulating for retirement of debt used to finance completed terminal expansion and concourse renovation projects, offset by decreases in assets restricted for payment of environmental remediation expenses. The remaining unrestricted net position balances of $58.5 million for FY 2015, $54.8 million for FY 2014 and $47.6 million for FY 2013 may be used for any lawful purpose of the Authority.

Deferred outflows of resources, long-term liabilities, deferred inflows of resources and unrestricted net position balances in 2015 and 2014 were significantly impacted by the implementation of GASB 68, which included a restatement of unrestricted net position for 2014. Deferred outflows of resources decreased for 2015 by $.6 million and increased by $3.7 million in 2014, while deferred inflows of resources decreased for 2015 by $1.1 million with an increase of $3.9 million for 2014. As noted above long-term liabilities were impacted by changes in the net pension liability for all Authority pension plans, which increased by $1.1 million in 2015 and decreased by $2.0 million in 2014, respectively. More information on the Authority’s pension plans and the implementation of GASB 68 can be found in Notes 8 and 16 to the financial statements.

REVENUES

In FY 2015, total revenues of $65.0 million were less than the prior fiscal year by 14.2%, whereas FY 2014 revenues of $75.8 million exceeded FY 2013 by 21.0%.

Operating revenues increased in FY 2015 over FY 2014 by $.6 million (1.5%). Revenue category changes included a $.8 million increase in space rentals, an increase of $.4 million in airport services and decreases in product sales and other operating revenues of $.3 million and $.4 million respectively. The increase in space rentals was related to US Airways operating as a nonsignatory airline at higher rental rates for FY 2015. The increase in airport services was primarily associated with higher recoveries of administrative costs on capital projects. The product sales and other operating revenue decreases resulted from transfer of general aviation fueling to private operators at Ryan Airfield in January 2014 and reduced fuel flowage fees as TAA discontinued commercial carrier fueling operations at Tucson International Airport in February 2014.

FINANCIAL POSITION (continued)


Increase % Increase Revenues by Major Source 2015 2014 (decrease) decrease (-)Landing fees $ 2,638,511 $ 2,677,840 $ (39,329) -1.5%Space rentals 15,516,879 14,712,712 804,167 5.5%Land rent 2,767,584 2,663,514 104,070 3.9%Concession revenue 14,458,462 14,442,602 15,860 0.1%Product sales 223,161 475,582 (252,421) -53.1%Airport services 3,787,935 3,338,100 449,835 13.5%Other operating revenues 2,594,253 3,040,508 (446,255) -14.7% Total operating revenues 41,986,785 41,350,858 635,927 1.5% Interest income 1,383,045 1,003,767 379,278 37.8%Net increase (decrease) in fair value of investments 407,702 147,571 260,131 176.3%Passenger facility charges 6,010,676 6,135,127 (124,451) -2.0%Gain on disposition of fixed assets 169,106 488,968 (319,862) -65.4%Other non-operating revenues - 19,448 (19,448) -100.0% Total non-operating revenues 7,970,529 7,794,881 175,648 2.3%Capital contributions 15,074,095 26,622,392 (11,548,297) -43.4% Total revenues $ 65,031,409 $ 75,768,131 $ (10,736,722) -14.2%


Operating revenues decreased in FY 2014 over FY 2013 by $1.2 million (2.9%). Most revenue category changes were relatively flat compared to FY 2013, with the exception of other operating revenues, which decreased $1.3 million and product sales, which decreased $.5 million. This decrease in other operating revenues resulted from reduced fuel flowage fees as TAA discontinued commercial carrier fueling operations at Tucson International Airport in February 2014. Product sales reflected transfer of general aviation fueling to private operators at TIA in November 2012 and Ryan Airfield in January 2014.

REVENUES (continued)

The following charts show the major sources and the percentage of operating revenues for fiscal years 2015 and 2014:

Operating Revenues FY 2015

Other Operating Revenues

6.2%

Airport Services

9.0%

Product Sales

0.5%

Concession Revenue

34.4%

Landing Fees6.3%

Space Rentals 37.0%

Land Rent 6.6%



7.3%

Airport Services

8.1%

Product Sales

1.2%

Concession Revenue

34.9%

Landing Fees6.5%

Space Rentals 35.6%

Land Rent 6.4%

FINANCIALS 29


NON-OPERATING REVENUES

Non-operating revenues consist mainly of income on investments and passenger facility charges (PFCs). PFC revenue fluctuates based on passenger levels. FY 2015 non-operating revenues increased $.2 million (2.3%) over FY 2014 due mainly to higher investment income. FY 2014 non-operating revenues increased $1.3 million (20.6%) over FY 2013 due mainly to higher investment income and gains on the sale of equipment no longer needed for aircraft fueling.

REVENUES (continued)

Increase % Increase Revenues by Major Source 2014 2013 (decrease) decrease (-)Landing fees $ 2,677,840 $ 2,727,682 $ (49,842) -1.8%Space rentals 14,712,712 14,541,598 171,114 1.2%Land rent 2,663,514 2,684,589 (21,075) -0.8%Concession revenue 14,442,602 14,234,828 207,774 1.5%Product sales 475,582 1,000,111 (524,529) -52.4%Airport services 3,338,100 3,069,561 268,539 8.7%Other operating revenues 3,040,508 4,336,606 (1,296,098) -29.9% Total operating revenues 41,350,858 42,594,975 (1,244,117) -2.9% Interest income 1,003,767 733,777 269,990 36.8%Net increase (decrease) in fair value of investments 147,571 (481,796) 629,367 3736.6%Passenger facility charges 6,135,127 6,193,285 (58,158) -10.0%Gain on disposition of dixed assets 488,968 - 488,968 100.0%Other non-operating revenues 19,448 15,772 3,676 23.3% Total non-operating revenues 7,794,881 6,461,038 1,333,843 20.6%Capital contributions 26,622,392 13,542,280 13,080,112 96.6% Total revenues $ 75,768,131 $ 62,598,293 $ 13,169,838 21.0%

The following charts show the major sources and the percentage of operating revenues for fiscal years 2014 and 2013:



10.3%

Airport Services

7.2%

Product Sales

2.3%

Concession Revenue

33.4%

Landing Fees6.4%

Space Rentals 34.1%

Land Rent 6.3%



7.3%

Airport Services

8.1%

Product Sales

1.2%

Concession Revenue

34.9%

Landing Fees6.5%

Space Rentals 35.6%

Land Rent 6.4%


Increase % Increase Expenses by Major Category 2015 2014 (decrease) decrease (-)Personnel $ 19,945,414 $ 21,271,873 $ (1,326,459) -6.2%Contractual services 6,064,007 5,843,202 220,805 3.8%Materials & supplies 1,271,755 1,343,790 (72,035) -5.4%Cost of product sales 194,121 421,204 (227,083) -53.9%Other operating expenses 914,491 2,632,370 (1,717,879) -65.3% Total operating expenses 28,389,788 31,512,439 (3,122,651) -9.9% Depreciation and amortization 16,577,216 15,860,805 716,411 4.5% Interest expense 2,667,488 2,787,713 (120,225) -4.3%Environmental expenses 421,500 1,120,109 (698,609) -62.4%Other non-operarting expenses 280 - 280 100.0% Total non-operating expenses 3,089,268 3,907,822 (818,554) -20.9% Total expenses $ 48,056,272 $ 51,281,066 $ (3,224,794) -6.3%

CAPITAL CONTRIBUTIONS

Capital contributions consist of various federal and state grants and vary from year-to-year depending on grant availability and timing of projects.

EXPENSES

Total expenses for FY 2015 decreased 6.3% from FY 2014. Operating expenses decreased $3.1 million (9.9%). The decrease in operating expenses was a result of lower pension costs in 2015. Non-operating expenses were $.8 million (20.9%) lower in FY 2015 than FY 2014. This was caused mainly by a 62.4% decrease in environmental expenses.


The following charts show the major operating expense categories for the Authority for FY 2014 and FY 2013:

Other Operating Expenses3.2%Cost of Product Sales 0.7% Materials & Supplies 4.5%

Contractual Services 21.4%

Personnel 70.2%

Operating Expenses FY 2015



Personnel 67.5%


FINANCIALS 31

EXPENSES (continued)

Total expenses for FY 2014 increased $1.7 million from FY 2013. Operating expenses increased $3.0 million (10.4%). The increase was primarily attributable to an increase in pension expense, offset by decreases in contractual services of $.5 million and cost of product sales of $.4 million due to discontinuance of general aviation fueling activities by the Authority. Non-operating expenses were $.6 million (13.8%) lower in FY 2014 than FY 2013. This was caused mainly by an 8.5% decrease in interest expense due to declining debt levels and a 23.8% decrease in environmental expenses.


Increase % Increase Expenses by Major Category 2014 2013 (decrease) decrease (-)Personnel $ 21,271,873 $ 18,855,823 $ 2,416,050 12.8%Contractual services 5,843,202 6,321,777 (478,575) -7.6%Materials & supplies 1,343,790 1,348,952 (5,162) -0.4%Cost of product sales 421,204 851,930 (430,726) -50.6%Other operating expenses 2,632,370 1,177,404 1,454,966 123.6% Total operating expenses 31,512,439 28,555,886 2,956,553 10.4% Depreciation and amortization 15,860,805 16,472,711 (611,906) -3.7% Interest expense 2,787,713 3,048,133 (260,420) -8.5%Environmental expenses 1,120,109 1,469,875 (349,766) -23.8%Other non-operarting expenses - 15,714 (15,714) -100.0% Total non-operating expenses 3,907,822 4,533,722 (625,900) -13.8% Total expenses $ 51,281,066 $ 49,562,319 $ 1,718,747 3.5%

The following charts show the major operating expense categories for the Authority for FY 2014 and FY 2013:



Personnel 66.1%




Personnel 67.5%



CAPITAL ASSETS

Net capital assets increased $8.1 million (2.7%) in FY 2015 over FY 2014. The increase resulted from spending on capital improvement program projects being higher than current year depreciation expense. The most significant FY 2015 CIP projects included phase II of the terminal apron reconstruction.

Increase % Increase Net Capital Assets 2015 2014 (decrease) decrease (-)Land $ 52,601,943 $ 52,914,313 $ (312,370) -0.6%Air avigation easement 30,136,281 30,136,281 - 0.0%Land improvements 140,288,559 142,255,938 (1,967,379) -1.4%Buildings and improvements 223,496,616 224,731,034 (1,234,418) -0.5%Utilities 5,951,108 5,951,108 - 0.0%Computer software 5,784,647 5,684,052 100,595 1.8%Furniture, fixtures, machinery and equipment 36,737,086 37,059,366 (322,280) -0.9%Artwork 455,630 453,006 2,624 0.6%Construction in progress 57,953,137 35,886,926 22,066,211 61.5% Gross capital assets 553,405,007 535,072,024 18,332,983 3.4%Less accumulated depreciation 252,019,689 241,752,719 10,266,970 4.2% Net capital assets $ 301,385,318 $ 293,319,305 $ 8,066,013 2.7%

Additional detailed information regarding capital asset activity may be found in Note 5 to the financial statements.


Increase % Increase Net Capital Assets 2014 2013 (decrease) decrease(-)Land $ 52,914,313 $ 52,914,313 $ - 0.0%Air avigation easement 30,136,281 30,136,281 - 0.0%Land improvements 142,255,938 137,065,352 5,190,586 3.8%Buildings and improvements 224,731,034 213,184,054 11,546,980 5.4%Utilities 5,951,108 5,951,108 - 0.0%Computer software 5,684,052 5,600,765 83,287 1.5%Furniture, fixtures, machinery and equipment 37,059,366 38,696,600 (1,637,234) -4.2%Artwork 453,006 453,006 - 0.0%Construction in progress 35,886,926 23,303,264 12,583,662 54.0% Gross capital assets 535,072,024 507,304,743 27,767,281 5.5%Less accumulated depreciation 241,752,719 227,473,682 14,279,037 6.3% Net capital assets $ 293,319,305 $ 279,831,061 $ 13,488,244 4.8%

Net capital assets increased $13.5 million (4.8%) in FY 2014 over FY 2013. The increase resulted from spending on capital improvement program projects being higher than current year depreciation expense. The most significant FY 2014 CIP projects included reconstruction of the terminal apron pavement, completion of the new Airport Communications and Emergency Operations Center and the Solar Panel Array in the daily parking lot.

FINANCIALS 33

Increase % Increase Outstanding Long-term Debt 2015 2014 (decrease) decrease (-)

Authority revenue bonds: Series 2001 subordinate lien $ 30,370,000 $ 31,580,000 $ (1,210,000) -3.8% Series 2006 subordinate lien 22,975,000 24,350,000 (1,375,000) -5.6% Total long-term debt $ 53,345,000 $ 55,930,000 $ (2,585,000) -4.6%


DEBT ACTIVITY

At the end of FY 2015, the Authority had total long-term debt outstanding of $53.3 million. The debt consists of bonds that are secured by airport revenues, with most of the bonds also secured by a pledge of passenger facility charge revenues. The decrease of $2.6 million (4.6%) from FY 2014 is a result of normal debt service activity.

At the end of FY 2014, the Authority had total long-term debt outstanding of $55.9 million. The debt consists of bonds that are secured by airport revenues, with most of the bonds also secured by a pledge of passenger facility charge revenues. The decrease of $2.5 million (4.2%) from FY 2013 is a result of normal debt service activity.

Additional detailed information regarding long-term debt activity may be found in Note 7 to the financial statements.

Increase % Increase Outstanding Long-term Debt 2014 2013 (decrease) decrease (-)

Authority revenue bonds: Series 2001 subordinate lien $ 31,580,000 $ 32,730,000 $ (1,150,000) -3.5% Series 2006 subordinate lien 24,350,000 25,655,000 (1,305,000) -5.1% Total long-term debt $ 55,930,000 $ 58,385,000 $ (2,455,000) -4.2%


DEBT SERVICE COVERAGE

Debt service coverage is a covenant of the Authority’s bond resolutions requiring that annual net airport system revenues be maintained in the amount of 1.25 times annual principal and interest on senior lien bond debt and 1.10 times annual principal and interest on subordinate lien bond debt. This coverage serves as an indicator to bondholders that funds are available for timely debt service payments. In FY 2015 net airport system revenues available for subordinate lien bond debt service was 4.32 times subordinate lien debt service. Since no senior lien bond debt was outstanding during FY 2015, there is no senior lien bond debt service ratio, and the total bond debt service coverage ratio is equivalent to the subordinate lien coverage ratio. The bond resolutions do not specify a requirement for total senior and subordinate lien bond debt service coverage.

Following is a summary of bond debt service coverage over the last three fiscal years. FY 2015 subordinate lien coverage improved from FY 2014 due to higher operating revenues and normal debt service. FY 2014 subordinate lien coverage improved from FY 2013 primarily as a result of normal debt service reduced by lower operating revenues. The 2003 senior lien bonds reached final maturity on June 1, 2013; consequently no coverage ratios are included for FY 2015 and FY 2014.

Bond Resolution Senior and Subordinate Lien 2015 2014 2013 Debt Service Coverage

Senior lien bond debt service coverage N/A N/A 5.16Required minimum 1.25 1.25 1.25 Subordinate lien bond debt service coverage 4.32 2.84 3.32Required minimum 1.10 1.10 1.10 Total senior and subordinate lien bond debt service coverage 4.32 2.84 2.46

Five of the six passenger airlines that provided TIA with scheduled service in FY 2015 have executed signatory use agreement extensions through September 30, 2016. The other passenger airline, US Airways, is operating under a nonsignatory agreement while it works through its merger with American Airlines. Effective February 1, 2014, into plane hydrant flowage fees are no longer collected from the airlines as passenger airline fueling was transferred to an airline consortium.

Signatory Airline Rates and Charges 2015 2014 2013

Ticketing per sq. ft. $ 78.81 $ 76.30 $ 76.30Hold room per gate 114,926.26 111,265.62 111,265.62 Baggage claim per sq. ft. 74.74 72.36 72.36 Baggage makeup per sq. ft. 26.26 25.42 25.42Into plane hydrant flowage per gallon N/A N/A 0.052 Landing fee per 1,000 lbs. 1.31 1.41 1.31


AIRLINE RATES AND CHARGES

The Authority has a long-term residual cost airport use agreement with the major passenger airlines (signatory airlines). This agreement provides a method for securing the financial stability of the Authority through a schedule of rates and charges. Following are some of the key rates and charges included in the agreement:

FINANCIALS 35

AIRLINE COST PER ENPLANEMENT

Airline Cost Per Enplanement (CPE) is a measure used in the airline and airport industries to show the average cost an airline incurs to enplane one passenger at a given airport. This figure is derived by dividing total passenger airline revenues earned at an airport by the total number of enplaned passengers.

CPE increased in FY 2015 over FY 2014 by $.70 per enplanement mainly as a result of the increase in space rental revenues attributed to US Airways operating under a nonsignatory agreement for FY 2015 as well as an overall decrease in passenger enplanements of 1.9%. CPE increased in FY 2014 over FY 2013 by $.05 per enplanement mainly as a result of the decrease in passenger enplanements of 2.1%.


Airline Cost Per Enplanement 2015 2014 2013Passenger airline revenues $ 13,742,670 $ 12,874,466 $ 13,062,499Enplaned passengers 1,590,321 1,621,231 1,655,617 Cost per enplanement $ 8.64 $ 7.94 $ 7.89


Statements of Net PositionSeptember 30, 2015 and 2014

ASSETS 2015 2014 Current assets: Unrestricted assets: Cash and cash equivalents - Note 3 $ 41,284,491 $ 13,807,801 Investments - Note 3 87,960,174 105,182,598 Accounts receivable, net of allowance for doubtful accounts of $435,336 for 2015 and 2014 1,191,885 974,119 Accrued interest receivable 258,759 236,216 Grants receivable 1,908,602 6,735,350 Notes receivable 11,941 11,053 Inventories - Note 4 373,175 410,050 Prepaid expenses and other assets 450,843 518,143 Total unrestricted current assets 133,439,870 127,875,330

Restricted assets: Debt Service Funds - Note 3: Airport Subordinate Lien Revenue Bonds, Series 2001: Cash and cash equivalents 229,930 52,003 Investments 724,933 902,027 Prepaid insurance 102,230 113,588 1,057,093 1,068,618 Airport Subordinate Lien Revenue Bonds, Series 2006: Cash and cash equivalents 380,245 85,773 Investments 1,198,851 1,459,726 Prepaid insurance 48,910 56,819 1,628,006 1,602,318 Passenger Facility Charge Fund - Note 3: Cash and cash equivalents 6,344,285 1,374,692 Investments 20,088,022 23,362,015 Accrued interest receivable 50,783 46,510 Accounts receivable 577,959 779,839 27,061,049 25,563,056

See Accompanying Notes.

FINANCIALS 37


ASSETS (continued) 2015 2014

Current assets - continued: Restricted assets - continued: Land Acquisition Fund - Note 3: Cash and cash equivalents $ 674,577 $ 106,423 Investments 2,134,173 1,807,970 Accrued interest receivable 5,100 4,763 2,813,850 1,919,156 Construction Fund - Note 3: Cash and cash equivalents 595,043 136,124 Investments 1,878,795 2,314,712 Accrued interest receivable 6,582 6,198 2,480,420 2,457,034

Debt Service Reserve Fund - Note 3: Cash and cash equivalents 620,834 143,088 Investments 1,957,391 2,435,137 2,578,225 2,578,225

Environmental Remediation Trust - Notes 3 and 14: Cash and cash equivalents 234,538 501,404 234,538 501,404 Total restricted current assets 37,853,181 35,689,811

Total current assets 171,293,051 163,565,141

Noncurrent assets: Unrestricted assets: Notes receivable, net of current portion 53,970 65,910 Capital assets - Notes 5 and 7 Not depreciated 141,146,992 119,390,526 Depreciated, net 160,238,326 173,928,779 Total capital assets 301,385,318 293,319,305 Total unrestricted noncurrent assets 301,439,288 293,385,215

Total noncurrent assets 301,439,288 293,385,215

Total assets 472,732,239 456,950,356

DEFERRED OUTFLOWS OF RESOURCES Difference between expected and actual experience 729,768 991,430 Changes of assumptions related to pension 1,884,195 2,704,565 Differences between projected and actual investment earnings related to pension 285,172 0 Pension contributions after measurement date 854,815 705,003 Total deferred outflows of resources 3,753,950 4,400,998

Total assets and deferred outflows of resources $ 476,486,289 $ 461,351,354

Statements of Net Position (continued)September 30, 2015 and 2014




LIABILITIES AND NET POSITION 2015 2014

Liabilities: Current liabilities: Payable from unrestricted assets: Accounts payable $ 708,300 $ 792,343 Accrued expenses 1,951,870 1,911,940 Unearned revenues - Note 6 1,319,444 407,412 Construction contracts payable 6,968,639 5,081,516 Current portion of environmental remediation payable - Note 14 3,166,783 3,336,812 Current portion of bonds payable - Note 7: Airport Subordinate Lien Revenue Bonds, Series 2001 1,270,000 1,210,000 Airport Subordinate Lien Revenue Bonds, Series 2006 1,440,000 1,375,000

Total payable from unrestricted assets 16,825,036 14,115,023 Payable from restricted assets: Accrued interest payable: Airport Subordinate Lien Revenue Bonds, Series 2001 531,530 551,697 Airport Subordinate Lien Revenue Bonds, Series 2006 376,742 399,658 908,272 951,355 Current portion of environmental remediation payable - Note 14 234,538 501,404

Total payable from restricted assets 1,142,810 1,452,759

Total current liabilities 17,967,846 15,567,782

Noncurrent liabilities: Payable from unrestricted assets: Bonds payable, net of current portion - Note 7: Airport Subordinate Lien Revenue Bonds, Series 2001 29,016,676 30,277,419 Airport Subordinate Lien Revenue Bonds, Series 2006 22,267,004 23,825,379

FINANCIALS 39


LIABILITIES AND NET POSITION (continued) 2015 2014 Noncurrent liabilities - continued: Payable from unrestricted assets - continued: Net pension liability 39,943,476 38,760,295 Environmental remediation payable, net of current portion - Note 14 21,811,157 23,294,627 Total payable from unrestricted assets 113,038,313 116,157,720

Total noncurrent liabilities 113,038,313 116,157,720

Total liabilities 131,006,158 131,725,502 Commitments and contingencies - Notes 9, 13 and 14

DEFERRED INFLOWS OF RESOURCES Difference between expected and actual experience 1,258,366 0 Differences between projected and actual investment earnings related to pension 848,148 3,468,936 Changes in proportion and differences between employer contributions and proportionate share of contributions related to pension 743,730 502,167 Total deferred inflows of resources 2,850,244 3,971,103

Net position: Net investment in capital assets 247,391,638 236,631,507

Restricted for: Debt service 4,355,052 4,297,806 Capital projects 29,541,469 28,020,090 Land acquisition 2,812,525 1,919,156 Total restricted net position 36,709,046 34,237,052

Unrestricted 58,529,202 54,786,190

Total net position $ 342,629,886 $ 325,654,749



2015 2014Operating revenues: Landing fees $ 2,638,511 $ 2,677,840 Space rentals 15,516,879 14,712,712 Land rent 2,767,584 2,663,514 Concession revenue 14,458,462 14,442,602 Product sales 223,161 475,582 Airport services 3,787,935 3,338,100 Other operating revenues 2,594,253 3,040,508 Total operating revenues 41,986,785 41,350,858

Operating expenses: Personnel expenses 19,945,414 21,271,873 Contractual services 6,064,007 5,843,202 Materials and supplies 1,271,755 1,343,790 Cost of product sales 194,121 421,204 Other operating expenses 914,491 2,632,370 Total operating expenses 28,389,788 31,512,439

Depreciation and amortization 16,577,216 15,860,805

Operating income (loss) (2,980,219) (6,022,386)

Nonoperating revenues (expenses): Interest income 1,383,045 1,003,767 Net increase in fair value of investments 407,702 147,571 Passenger facility charges - Note 11 6,010,676 6,135,127 Interest expense and fiscal charges (2,667,488) (2,787,713) Gain on disposition of capital assets 169,106 488,968 Environmental remediation expenses - Note 14 (421,500) (1,120,109) Other nonoperating revenue (expense) (280) 19,448 4,881,261 3,887,059

Income (loss) before capital contributions 1,901,042 (2,135,327)

Capital contributions: Federal 12,755,207 24,158,082 State 2,318,888 2,464,310 15,074,095 26,622,392

Increase in net position 16,975,137 24,487,065 Total net position, beginning of year (restated) 325,654,749 300,807,832

Prior period adjustment 0 359,852

Total net position, end of year $ 342,629,886 $ 325,654,749

Statements of Revenues, Expenses and Changes in Net PositionYears ended September 30, 2015 and 2014


FINANCIALS 41


2015 2014

Cash flows from operating activities: Receipts from airlines and tenants $ 42,255,952 $ 41,060,743 Federal/state grants in aid 410,469 395,920 Payments to suppliers (8,399,487) (10,242,706) Payments for personnel services (19,201,599) (19,028,609) Payments for environmental remediation (2,341,866) (2,730,134)Net cash provided by operating activities 12,723,469 9,455,214

Cash flows from capital and related financing activities: Federal/state contributed capital, grants in aid 19,915,473 23,903,643 Acquisition of capital assets (23,308,371) (29,128,032) Proceeds from sale of capital assets 740,637 794,255 Principal paid on long-term debt (2,585,000) (2,455,000) Passenger facility charges receipts 6,212,556 6,042,020 Interest paid on long-term debt (2,838,957) (2,944,359)Net cash (used) in capital and related financing activities (1,863,662) (3,787,473)

Cash flows from investing activities: Interest on investments 1,086,719 882,317 Maturity and calls of investments 90,544,807 27,573,450 Purchase of investments (68,346,750) (42,875,243) Collections of notes receivable 11,052 10,232 Net cash provided (used) in investing activities 23,295,828 (14,409,244)

Net increase (decrease) in cash and cash equivalents 34,155,635 (8,741,503)

Cash and cash equivalents, beginning of year 16,208,308 24,949,811

Cash and cash equivalents, end of year $ 50,363,943 $ 16,208,308

Statements of Cash FlowsYears ended September 30, 2015 and 2014


Statements of Cash Flows (continued)Years ended September 30, 2015 and 2014

2015 2014

Reconciliation of operating income to net cash provided by operating activities: Operating income (loss) $ (2,980,219) $ (6,022,386)

Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 16,577,216 15,860,805 Payments for environmental remediation (2,341,865) (2,730,134) Effects of changes in operating assets and liabilities: Receivables (232,396) (18,955) Inventories 36,875 110,739 Prepaid expenses and other assets 86,567 35,273 Accounts payable (84,040) (151,637) Accrued expenses 39,929 133,582 Unearned revenues 912,032 124,760 Net pension liability and related changes in deferred outflows and inflows of resources 709,370 2,113,167

Net cash provided by operating activities $ 12,723,469 $ 9,455,214

Noncash nonoperating, capital, financing and investing activities: Additions to capital assets included in accounts payable $ 6,968,639 $ 5,081,517

Net appreciation (depreciation) in fair value of investments $ 407,702 $ 147,571

Increase in estimate of environmental remediation liability $ 421,500 $ 1,120,109


FINANCIALS 43

Notes to Financial StatementsSeptember 30, 2015 and 2014

NOTE 1 – ORGANIZATION AND REPORTING ENTITY

Tucson Airport Authority, Inc. (Authority), a civic, nonprofit corporation as provided for under the laws of the State of Arizona, was established April 12, 1948 for the purpose of developing and promoting transportation and commerce in the State through the operation and maintenance of airports and related facilities adjacent to the City of Tucson in Pima County, Arizona. The Authority’s membership consists of up to 85 residents of the airport service area who elect a Board of Directors (Board) which governs the Authority. The Authority has no taxing power and presently operates two airports: Tucson International Airport (Airport) and Ryan Airfield.

The land and improvements comprising the Airport are owned by the City of Tucson (City) and are leased by the City to the Authority pursuant to a lease dated October 14, 1948, as amended (Airport Lease). Pursuant to the terms of the Airport Lease, which expires October 14, 2073, the Authority has the obligation to operate, maintain and develop the Airport as a public facility for the accommodation of air commerce. In addition, the Airport Lease provides for certain other rights, powers and obligations as specified therein. Under the terms of the Airport Lease, the Authority has been required to make only nominal payments to date. Upon expiration of the Airport Lease, the Airport and improvements thereon, except as provided for in the Airport Lease, return to the custody of the City.

All five of the passenger airlines utilizing the Airport have entered into Signatory Airport Use Agreements with the Authority and are referred to as Signatory Airlines. In general, the Airport Use Agreements provide that fixed rentals are to be paid monthly by each Signatory Airline for use and occupancy of certain terminal space and other facilities. In addition, the Signatory Airlines collectively pay landing fees which are determined so that the aggregate landing fees paid in each fiscal year by all Signatory Airlines, after taking into consideration other revenues of the Authority, is an amount which provides sufficient operating funds to cover annual debt service of the bonds, annual operating expenses and satisfies other bond resolution requirements. The Signatory Airport Use Agreement expires on September 30, 2016.

The accompanying financial statements include the accounts of the Authority. There are no potential component units, nor has the Authority been determined to be a component unit of any other entity.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies follows:

Basis of accounting

The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. All transactions are accounted for in a single enterprise fund. Enterprise funds are used to account for operations (1) that are financed and operated in a manner similar to private business enterprises where the intent of the governing body is that the costs (expenses including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or (2) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability or other purposes.

Use of estimates in preparing financial statements

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make a number of estimates and assumptions, e.g., useful lives of capital assets, that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities at the date of the financial statements. The most significant estimates recorded in the financial statements are the net pension liability (Note 8) and environmental remediation liability (Note 14).

Measurement focus and basis of accounting

The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. Proprietary funds are accounted for on a flow of economic resources measurement focus. With this measurement focus, all


assets and liabilities associated with the operation of these funds are included on the Statements of Net Position. In accordance with GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, Net position is displayed in three components – net investment in capital assets, restricted and unrestricted. Proprietary fund-type operating statements present increases (e.g., revenues) and decreases (e.g., expenses) in net position.

On proprietary fund financial statements, operating revenues are those that flow directly from the operations of that activity, (i.e., charges to customers or users who purchase or use the goods or services of that activity). Operating expenses are those that are incurred to provide those goods or services. Nonoperating revenues and expenses are items such as investment income and interest expense that are not a result of the direct operations of the activity.

Basis of accounting refers to when revenues and expenses are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied. The accrual basis of accounting is utilized by proprietary fund types. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. When both restricted and unrestricted resources are available for use, it is the Authority’s practice to use restricted resources first, then unrestricted resources as they are needed.

Budgets

The Authority utilizes a budget process for planning purposes with adoption by the Board of Directors. Pursuant to the Airport Lease, the Authority prepares a biennial budget that is presented to the Mayor and Council of the City for informational purposes. An annual budget is also reviewed by representatives of the Signatory Airlines. The budget is prepared in sufficient detail to enable its use by management in monitoring operations.

Cash and cash equivalents

Investments are categorized as cash equivalents if their maturity date is 90 days or less at the date of purchase. Those assets having a maturity of more than 90 days are classified as investments for statement of net position presentation. Cash equivalents include cash on hand, checking, savings, money market accounts and cash equivalent mutual funds.

Grant and accounts receivable

The Authority grants unsecured credit to its tenants, the U.S. government and state and local agencies without interest. Receivables are reported at their gross value when earned as the underlying exchange transaction occurs. Receivables are reduced by an allowance for the estimated portion that is expected to be uncollectible. This estimate is made based on collection history, aviation industry trends and current information regarding the credit worthiness of the debtors. When collection activity results in receipt of amounts previously written off against the allowance, revenue is recognized for the amount collected.

Inventories

Inventories consist of fuel for resale and operating and maintenance supplies and are recorded at the lower of cost or market with cost determined on an average cost basis.

Investments

Investments are stated at fair value. The Authority’s policy is to invest in certificates of deposit, federal treasury and agency securities, cash equivalent mutual funds and repurchase agreements, and to hold such investments to maturity. In accordance with this policy, investments are purchased so that maturities will occur as projected cash flow needs arise in connection with daily operations, construction projects and bond debt service requirements.

Bond issuance costs

Costs of issuing general airport revenue bonds, except prepaid insurance, are expensed as incurred. Insurance is recorded as a prepaid asset and amortized over the life of the bonds using the effective interest method.

Notes to Financial Statements (continued)September 30, 2015 and 2014

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

FINANCIALS 45

Capital assets

Capital assets are stated at cost or estimated historical cost if original cost is not available and include expenditures which substantially increase the useful lives of existing assets. Capital assets, includes intangible assets, which are without physical substance that provide economic benefits through the rights and privileges associated with their possession, including aviation avigation easements and computer software. Gifts or contributions of such assets are stated at estimated fair value at the date received. The Authority’s policy is to capitalize assets with a cost of $2,500 or more. Routine maintenance and repairs are expensed as incurred.

Depreciation (including amortization of intangible assets) has been provided using the straight-line method over the following estimated useful lives of the related assets:

Utilities 9 to 20 years Land improvements 3 to 50 years Buildings and improvements 3 to 50 years Intangibles 2 to 25 years Furniture, fixtures, machinery and equipment 2 to 25 years

Depreciation of capital assets is recorded as an expense in the Statements of Revenues, Expenses and Changes in Net Position.

Interest incurred on debt obligations to finance construction projects is capitalized during the construction period. Interest income from funds obtained through Authority bond proceeds that are restricted for construction purposes is netted against interest expense incurred on the bonds in determining the amount of capitalized interest.

Capital assets are considered impaired if there is a significant unexpected decline in the service utility of the asset. Impaired capital assets that will no longer be used by the Authority are reported at the lower of carrying or fair value. Impairment losses on capital assets that will continue to be used by the Authority are measured using the method that best reflects the diminished service utility of the capital asset.

Restricted assets

Certain resources of the Authority are classified as restricted assets on the Statements of Net Position because their use is limited by applicable bond covenants, passenger facility charge applications or the environmental consent decree for payment of the respective liabilities.

Compensated absences

The Authority’s personnel policy provides full-time employees with vacation in varying amounts and, at termination, an employee is paid for accumulated (vested) vacation. Accordingly, compensation for vacation leave is charged to expense as earned by the employee, and accumulated unpaid vacation leave payable upon an employee’s termination is recorded as a current liability.

Net Pension Liability, Deferred Outflows and Inflows of Resources

For purposes of measuring the net pension liability, deferred outflows and inflows of resources related to pensions, and pension expense, information about the fiduciary net position of PERS, additions to/deductions from the PERS fiduciary net position have been determined on the same basis as they are reported by the System. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

In addition to assets and liabilities, the Authority reports separate sections for deferred outflows of resources and deferred inflows of resources. Deferred outflows of resources represent a consumption of net position that applies to a future period(s) and won’t be recognized as an outflow of resources until then. Deferred inflows of resources represent an acquisition of resources that is applicable to future reporting period(s) that won’t be recognized as an inflow of resources until then.




Net position

The Authority’s policy is to restrict net position to the extent that assets restricted for bond debt service exceed the applicable debt service liabilities, and these assets are funded from operations rather than bond proceeds. Because these restricted assets do not exceed debt service liabilities at September 30, 2015 and 2014, no reservation of net position is required.

Environmental remediation costs

The Authority accounts for environmental remediation costs in accordance with Governmental Accounting Standards Board Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations. See Note 14 for disclosures regarding information reported in the financial statements for known obligations.

Passenger Facility Charges

In 1990, Congress approved the Aviation Safety and Capacity Expansion Act (Act), which authorized domestic airports to impose a Passenger Facility Charge (PFC) on enplaning passengers. In May 1991, the Federal Aviation Administration (FAA) issued the regulations for the use and reporting of PFCs. PFCs may be used for airport projects which meet at least one of the following criteria: preserve or enhance safety, security or capacity of the national air transportation system; reduce noise or mitigate noise impacts resulting from an airport; or furnish opportunities for enhanced competition between or among carriers.

The Authority was granted permission to begin collection of a $3 per passenger PFC effective February 1, 1998. In April 2006, the FAA approved the Authority’s application amendment to increase the PFC from $3 to $4.50. The increase in rate was effective October 1, 2006. The charges, less an ($0.11) administrative fee charged by the airlines for processing, are collected by the airlines and remitted on a monthly basis to the Authority.

At the present time, GASB has not released authoritative guidance on the accounting treatment of PFCs. The Authority’s position is that PFCs should be treated as revenue because: 1) the Authority earns the PFCs due to a passenger’s use of the Airport; 2) after receipt, the Authority has clear title to the funds and is not required to refund or return them; 3) the Authority is entitled to assess late charges on any payment not received by the deadlines specified in the Act; and 4) the fee is reserved for specific purposes as defined in the approval letter received from the FAA.

Since the Authority’s applications for PFCs were approved as Impose and Use, it is the position of the Authority that revenue should be recognized immediately when PFCs are earned. Due to their restricted use, however, PFCs are categorized as nonoperating revenues and are accounted for on the accrual basis.

New Accounting Standards

Implementation of the following GASB statements is effective fiscal year 2014

Issued in June 2012, GASB Statement No. 68, Accounting and Financial Reporting for Pensions – an Amendment of GASB Statement No. 27, replaces the requirements of previously issued statements as they relate to governments that provide pensions through pension plans administered by trusts or similar arrangements that meet certain criteria. This statement requires governments providing defined benefit pensions to recognize their long-term obligation for pension benefits as a liability. Governments will report in their financial statements a net pension liability that represents the difference between the total pension liability and the pension plan’s fiduciary net position. This statement also enhances accountability and transparency through revised and new note disclosures and required supplementary information, including descriptive information about the types of benefits available, how to determine the amount of pension plan contributions, and assumptions and methods used in calculating the pension liability. This statement requires the Authority to record a liability and expense equal to their proportionate share of the collective net pension liability and expense of the Arizona State Retirement System’s multi-employer defined benefit pension plan.



FINANCIALS 47


Issued in November 2013, GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - an Amendment of GASB Statement No. 68, amends GASB Statement No. 68 to require that, at transition, a government recognize a beginning deferred outflow of resources for its pension contributions, if any, made subsequent to the measurement date of the beginning net pension liability. GASB Statement No. 68, as amended, continues to require that beginning balances for other deferred outflows of resources and deferred inflows of resources related to pensions be reported at transition only if it is practical to determine all such amounts. The provisions of this statement are required to be applied simultaneously with the provisions of GASB Statement No. 68.

Pronouncements issued but not effective

The GASB issued pronouncements that may impact future financial presentations. Management has not currently determined what impact implementation of these statements may have on the financial statements of the Authority.

• Issued in February 2015, GASB Statement No. 72, Fair Value Measurement and Application, addresses accounting and financial reporting issues related to fair value measurements. The definition of fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This statement provides guidance for determining a fair value measurement for financial reporting purposes. This statement also provides guidance for applying fair value to certain investments and disclosures related to all fair value measurements. Implementation of this statement is effective fiscal year 2016.

• Issued in June 2015, GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68, establishes requirements for defined benefit pensions that are not within the scope of GASB Statement No. 68 as well as for the assets accumulated for purposes of providing those pensions. In addition, this statement also clarifies the application of certain provisions of GASB Statement No. 68 with regard to the information that is required to be presented as notes to the 10-year schedules of required supplementary information about investment-related factors that significantly affect trends in the amounts reported. Implementation of this statement is effective fiscal year 2017.

NOTE 3 – CASH, CASH EQUIVALENTS AND INVESTMENTS

The Authority maintains a cash, cash equivalents and investment pool (Pooled Investment Fund) for all funds except environmental remediation trust assets, which are maintained in a separate investment pool (Master Environmental Trust Fund). The Authority maintains detailed records sufficient to meet any and all requirements and restrictions on both funds, which include PFC, and Land Acquisition Funds. Additionally, the Board, at its discretion, may internally designate certain funds for specific purposes.

Deposits

At September 30, 2015, the carrying amount of the Authority’s deposits was $13,491,624 and the bank balance was $13,791,720. At September 30, 2014, the carrying amount of the Authority’s deposits was $7,607,152 and the bank balance was $7,688,013. The difference between the carrying amounts and the bank balances represents outstanding checks, deposits in transit and other reconciling items.

Custodial credit risk - deposits and investments

In the case of deposits, this is the risk that in the event of a bank failure, the Authority’s deposits may not be returned to it. For an investment, this is the risk that in the event of the failure of the counterparty, the Authority will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party.

The Authority’s investment policy requires that all deposits at financial institutions, certificates of deposit, repurchase agreements and money market mutual funds be insured, registered in the Authority’s name or collateralized to 102%



and held by the Authority’s safekeeping agent in the Authority’s name. Collateral is restricted to United States treasuries, agencies or instrumentalities.

The Authority invests in obligations of the U.S. Government and its agencies. Some of these obligations are classified as cash equivalents on the accompanying Statements of Net Position as the amounts are in money market fund pools of such securities. The amount shown in the table below includes all U.S. Government securities, regardless of classification. The Authority’s mutual fund investments are invested exclusively in short-term, U.S. Government Treasury obligations. The investments are valued at amortized cost, which approximates market. These assets are classified as cash equivalents.

Interest rate risk

In accordance with its investment policy, the Authority manages its exposure to interest rate risk by regular (not less than semi-annually) evaluation in conjunction with Authority investment advisors of the Authority’s cash position to determine the amount of short and long-term funds available for investment within the context of the entire portfolio and to project the term for such investments. Funds that can be invested for a longer duration are to be invested predominantly in high credit quality U.S. obligations with an individual obligation not to exceed 10 years and a weighted-average maturity of all such investments of not greater than 5 years.

Credit risk

In the absence of definitive legal requirements, the Authority has elected to conform to Arizona Revised Statutes (Statutes) concerning the investment of all assets in the Pooled Investment Fund, if such statutes are more restrictive than its investment policy. The Statutes permit the following investments:

1. Certificates of deposit in eligible depositories with collateralization requirements and that do not exceed 12 months to maturity from date of issue;

2. Obligations issued or guaranteed by the United States Government or any of the senior debt of its agencies, corporations, sponsored corporations or instrumentalities;

3. Repurchase agreements with a maximum maturity of 180 days;

4. Guaranteed investment contracts structured in a collateralized repurchase agreement format;

5. SEC registered money market mutual funds holding only federal securities;

6. Bonds, notes or other evidences of indebtedness of:

a. The State or any of its counties, incorporated cities or towns, or school districts;

b. Certain county or municipal districts of any state that are payable from revenues, earnings or a special tax specifically pledged for payment of the principal and interest on the obligations and if no default has occurred within the last 5 years; and

c. Special assessment bonds of county or municipal improvement districts of any state;

7. Interest-bearing savings accounts in banks and savings and loan institutions doing business in the State whose accounts are insured by the Federal Deposit Insurance Corporation (FDIC) but only if such deposits in excess of insured amounts are collateralized to the same extent as public deposits;

8. State investment pool;

9. Commercial domestic paper of prime quality that is rated “P1” or better by Moody’s or “A1” or better by Standard & Poor’s;

10. Bonds, debentures and notes that are issued by corporations organized in the United States that are rated “A” or better by Moody’s or Standard & Poor’s.


NOTE 3 – CASH, CASH EQUIVALENTS AND INVESTMENTS (continued)

FINANCIALS 49


Credit risk - continued

The Master Remediation Trust Fund Agreement permits the following investments in the Master Environmental Trust Fund:

1. “Permitted investments” as outlined in the Authority’s bond resolution:

a. Bank savings accounts, time certificates of deposit or open account certificates of deposit;

b. Direct obligations of or guaranteed by the United States Government or issued by the following agencies:

1) Banks or Cooperatives, the Export-Import Bank of the United States, Federal Intermediate Credit Banks, Federal Home Loan Banks, Federal Land Banks, Fannie Mae or Ginnie Mae;

2) Repurchase agreements collateralized solely by federal securities;

3) Guaranteed investment contracts structured in a collateralized repurchase agreement format and involving only federal securities;

4) Money market mutual funds holding only federal securities;

5) Full faith and credit direct and general obligations of the State or political subdivisions which are rated in the two highest rating categories by two nationally recognized bond rating agencies and are legal investments for fiduciaries in the State of Arizona;

6) Bank savings accounts, time certificates of deposit or open certificates of deposit.

2. Such other prudent investments as are consistent with investment policies adopted by the Authority’s Board of Directors:

a. Certificates of deposit issued by state and national banks doing business in Arizona that:

1) Are guaranteed by the FDIC or its successor;

2) Are collateralized at 102% by obligations of the United States Government or its agencies and instrumentalities; and

3) Do not exceed 6 months to maturity from date of issuance;

b. Obligations of the United States, its agencies and instrumentalities;

c. The United States Government or its agencies and instrumentalities, collateralized at 102%, executed through primary government securities dealers and with collateral held by third-party custodians;

d. Bankers’ acceptances with a maximum maturity of 270 days, eligible as collateral for borrowing from a Federal Reserve Bank and from a United States bank with short-term ratings not less than A1/P1 or an equivalent;

e. Fully collateralized guaranteed investment contracts executed with a primary securities dealer as defined by the Federal Reserve;

f. Securities and Exchange Commission (SEC) registered money market funds provided the fund conforms to all bond resolutions;

g. Bonds or notes issued by any state or municipality, with ratings not less than AA, or an equivalent.

3. Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933.



Fair Value

2015 2014 RatingsPooled investment fund: $ % $ % U.S. Agency securities: Federal Farm Credit Bank $ 27,011,466 23% $ 32,314,753 24% AAA Federal Home Loan Bank 45,510,896 39% 86,093,953 62% AAA Federal Home Loan Mortgage Corp. 23,930,795 21% 2,994,183 2% AAA Federal National Mortgage Association 7,075,581 6% - 0% AAA U.S. Treasury Bills 12,413,601 11% 16,061,296 12% AAA $ 115,942,339 100% $ 137,464,185 100%



Cash, cash equivalents and investments are classified on the Statements of Net Position at September 30, 2015 and 2014 as follows: Cash and cash equivalents Investments

2015 2014 2015 2014Unrestricted $ 41,284,491 $ 13,807,801 $ 87,960,174 $ 105,182,598Airport Subordinate Lien Revenue Bonds, Series 2001 229,930 53,003 724,933 902,027Airport Subordinate Lien Revenue Bonds, Series 2006 380,245 85,773 1,198,851 1,459,726Passenger Facility Charge Fund 6,344,285 1,374,692 20,088,022 23,362,015Land Acquisition Fund 674,577 106,423 2,134,173 1,807,970Construction Fund 595,043 136,124 1,878,795 2,314,712Debt Service Reserve Fund 620,834 143,088 1,957,391 2,435,137Environmental Remediation Trust 234,538 501,404 - - $ 50,363,943 $ 16,208,308 $ 115,942,339 $ 137,464,185

Concentration of credit risk

In order to provide for diversification and reduce market and credit risk exposures, the following diversification parameters have been established in the Authority’s investment policies:

Maximum % of portfolio Certificates of deposit 20% U.S. Treasuries, agencies and instrumentalities 100% Repurchase agreements 50% Bankers’ acceptances 10% Guaranteed investment contracts 10% Money market mutual funds 50% State/municipal bonds or notes 20%

At September 30, 2015 and 2014, the Authority had the following investments:

FINANCIALS 51


NOTE 4 – INVENTORIES

Inventories at September 30, 2015 and 2014 follow:

2015 2014

Fuel, for resale $ 54,536 $ 73,272 Operating and maintenance supplies 318,639 336,778 $ 373,175 $ 410,050

At September 30, 2015, the Authority’s investments are scheduled to mature as follows:

2015 2014 RatingsDeposits at financial institutions $ 13,491,624 $ 7,607,152 N/AGoldman Sachs Financial Square Treasury Obligations Fund 36,862,669 8,591,506 AAACash on hand 9,650 9,650 N/A Total cash and cash equivalents $ 50,363,943 $ 16,208,308

Investment maturities (in months)

Fair value Less than 12 12-24 24-36 36-60Pooled investment fund: U.S. Treasury and Agency securities $ 115,942,339 $ 25,029,970 $ 27,420,608 $ 24,981,235 $ 38,510,526

Concentration and credit risk - continued

Cash and cash equivalents are comprised of the following at September 30, 2015 and 2014:



NOTE 5 – CAPITAL ASSETS

Capital asset activity for the year ended September 30, 2015 follows:


Beginning Ending balance Transfers Increases Decreases balanceBusiness type activities: Capital assets not being depreciated: Land $ 52,914,313 $ - $ - $ (312,369) $ 52,601,944 Air Avigation Easements 30,136,281 - - 30,136,281 Artwork 453,006 - $ 2,624 - 455,630 Construction in progress 35,886,926 (1,312,123) 23,378,334 - 57,953,137 Total assets not being depreciated 119,390,526 (1,312,123) 23,380,958 (312,369) 141,146,992 Capital assets being depreciated: Utilities 5,951,108 - - - 5,951,108 Land improvements 142,255,938 599,226 711,845 (3,278,451) 140,288,558 Buildings and improvements 224,731,034 21,848 707,039 (1,963,305) 223,496,616 Computer software 5,684,052 100,595 5,784,647 Furniture, fixtures, machinery and equipment 37,059,366 691,049 295,059 (1,308,388) 36,737,086 Total assets being depreciated 415,681,498 1,312,123 1,814,538 (6,550,144) 412,258,015 Less accumulated depreciation for: Utilities 5,780,714 - 45,716 5,826,430 Land improvements 87,344,057 - 6,160,659 (3,188,129) 90,316,587 Buildings and improvements 120,777,387 - 7,890,318 (1,806,673) 126,861,032 Computer software 5,154,434 - 509,782 5,664,216 Furniture, fixtures, machinery and equipment 22,696,127 - 1,951,475 (1,296,178) 23,351,424 241,752,719 - 16,557,950 (6,290,980) 252,019,689 Net capital assets being depreciated 173,928,779 1,312,123 (14,743,412) (259,164) 160,238,326

Net capital assets $ 293,319,305 $ - $ 8,637,546 $ (571,533) $ 301,385,318

FINANCIALS 53

2015 2014 Capital assets $ 553,405,007 $ 535,072,024 Less accumulated depreciation (252,019,689) (241,752,719) Less outstanding debt (53,993,680) (56,687,798) Net investment in capital assets $ 247,391,638 $ 236,631,507

Depreciation expense was $16,557,950 and $15,840,648 and for the years ended September 30, 2015 and 2014, respectively.

Net investment in capital assets as of September 30 is as follows:

NOTE 5 – CAPITAL ASSETS (continued)

Capital asset activity for the year ended September 30, 2014 follows:


Beginning Ending balance Transfers Increases Decreases balanceBusiness type activities: Capital assets not being depreciated: Land $ 52,914,313 $ - $ - $ - $ 52,914,313 Air Avigation Easements 30,136,281 30,136,281 Artwork 453,006 - $ - - 453,006 Construction in progress 23,303,264 (14,574,141) 27,157,803 - 35,886,926 Total assets not being depreciated 106,806,864 (14,574,141) 23,380,958 - 119,390,526 Capital assets being depreciated: Utilities 5,951,108 - - - 5,951,108 Land improvements 137,065,352 3,537,160 1,653,426 - 142,255,938 Buildings and improvements 213,184,054 10,911,597 635,383 - 224,731,034 Computer software 5,600,765 83,287 - - 5,684,052 Furniture, fixtures, machinery and equipment 38,696,600 42,097 188,393 (1,867,724) 37,059,366 Total assets being depreciated 400,497,879 14,574,141 2,477,202 (1,867,724) 415,681,498 Less accumulated depreciation for: Utilities 5,734,956 - 45,758 5,780,714 Land improvements 81,248,452 - 6,095,605 87,344,057 Buildings and improvements 113,249,248 - 7,528,139 120,777,387 Computer software 4,996,209 - 158,225 5,154,434 Furniture, fixtures, machinery and equipment 22,244,817 - 2,012,921 (1,561,611) 22,696,127 227,473,682 - 15,840,648 (1,561,611) 241,752,719 Net capital assets being depreciated 173,024,197 14,574,141 (13,363,446) (306,113) 173,928,779

Net capital assets $ 279,831,061 $ - $ 13,794,357 $ (306,113) $ 293,319,305


NOTE 6 – UNEARNED REVENUES

The Authority has been awarded certain amounts by the Pima County Superior Court in connection with assets seized by Authority law enforcement officers (forfeiture funds) in narcotics investigations. Such amounts have been recorded as unearned revenues pending approval for expenditure by the Pima County Attorney’s Office. The Authority’s Board of Directors has approved the use of 25% of these funds for the Pima County Anti-Drug/Anti-Gang Program and the remainder for drug enforcement and prevention by the Authority’s Police Department.

At September 30, 2015 and 2014, the Authority had received rent from certain tenants and certain other payments applicable to the subsequent year. Such amounts have been classified as unearned revenue. A detail of unearned revenues at September 30, 2015 and 2014 follows:

2015 2014 Forfeiture funds $ 128,702 $ 93,913 Tenant rent payments 1,190,742 313,499 Total unearned revenues $ 1,319,444 $ 407,412


NOTE 7 – LONG-TERM DEBT

Long-term debt at September 30, 2015 and 2014 follows:

Beginning Ending balance Increases Decreases balance2015 activity: Business-type activities: Authority bonds: 2001 subordinate lien airport revenue bonds $ 31,580,000 $ - $ (1,210,000) $ 30,370,000 2006 subordinate lien airport revenue bonds 24,350,000 - (1,375,000) 22,975,000 Total debt 55,930,000 - (2,585,000) 53,345,000 Less current portion (2,585,000) - (125,000) (2,710,000) Noncurrent debt $ 53,345,000 $ - $ (2,710,000) $ 50,635,000

Beginning Ending balance Increases Decreases balance2014 activity: Business-type activities: Authority bonds: 2001 subordinate lien airport revenue bonds $ 32,730,000 $ - $ (1,150,000) $ 31,580,000 2006 subordinate lien airport revenue bonds 25,655,000 - (1,305,000) 24,350,000 Total debt 58,385,000 - (2,455,000) 55,930,00 Less current portion (2,455,000) - (130,000) (2,585,000) Noncurrent debt $ 55,930,000 $ - $ (2,585,000) $ 53,345,000

FINANCIALS 55

2015 2014

$41,580,000 Subordinate Lien Revenue Bonds, Series 2001. Bonds due in annual amounts, ranging from $715,000 to $2,720,000, June 1, 2004 through June 1, 2031; interest payable semiannually at 4.30% to 5.35%. $ 30,370,000 $ 31,580,000

$32,110,000 Subordinate Lien Airport Revenue Bonds, Series 2006. Bonds due in annual amounts, ranging from $750,000 to $2,470,000, December 1, 2007 through December 1, 2026; interest payable semiannually at 4.25% to 5.00%. 22,975,000 24,350,000 53,345,000 55,930,000

Unamortized premium – Series 2006 bonds 732,004 850,379 Unamortized discount – Series 2001 bonds (83,324) (92,581) 53,993,680 56,687,798Less current portion (2,710,000) (2,585,000)

Noncurrent debt $ 51,283,680 $ 54,102,798


NOTE 7 – LONG-TERM DEBT (continued)

A summary of annual long-term debt service requirements to maturity as of September 30, 2015, including required principal installments to the bond fund of $53,345,000 and interest payments of $21,881,988 totaling $75,226,988 follows:

Airport Subordinate Lien Airport Subordinate Lien Revenue Bonds, Series 2006 Revenue Bonds, Series 2001

Principal Interest Principal Interest

Year ending September 30, 2016 $ 1,440,000 $ 1,070,225 2016 $ 1,270,000 $ 1,573,423 2017 1,520,000 994,892 2017 1,330,000 1,508,923 2018 1,590,000 915,975 2018 1,400,000 1,441,257 2019 1,670,000 833,142 2019 1,470,000 1,370,090 2020 1,755,000 746,100 2020 1,540,000 1,295,423 2021-2025 10,180,000 2,265,208 2021-2025 8,985,000 5,172,880 2026-2028 4,820,000 142,054 2026-2030 11,655,000 2,455,383 $ 22,975,000 $ 6,967,596 2031 2,720,000 97,013 $ 30,370,000 $ 14,914,392

The Authority’s bond resolutions require periodic transfers from gross operating income to bond funds restricted for the payment of principal and interest. Other transfers to certain accounts are required by the bond resolutions after payment of operating and maintenance expenses. At September 30, 2015 and 2014, the Authority was in compliance with these and other bond resolution covenants.

Under U.S. Treasury regulations, all governmental tax-exempt debt issued after August 31, 1986, is subject to arbitrage rebate requirements. The requirements stipulate, in general, that the earnings from the investment of tax-exempt bond proceeds, which exceed related interest expenditure on the bonds, must be remitted to the Federal government on every fifth anniversary of each bond issue. The Authority’s practice is to engage an independent consultant to evaluate outstanding tax-exempt debt for arbitrage liability and the Authority is of the opinion that no liability has been incurred as of September 30, 2015.

The debt is secured by a lien on net revenues of the airport system.



NOTE 8 – PENSION PLANS

The Authority participates in the Arizona State Retirement System (ASRS) and the Arizona Public Safety Personnel Retirement System (PSPRS).

At September 30, 2015 and 2014 the Authority reported in the Statements of Net Position and Statements of Revenues, Expenses and Changes in Net Position the following amounts related to all pension plans it participates in.

September 30, 2015

PSPRS-Fire PSPRS-Police ASRS Department Department NetNet pension liabilities $ 18,108,646 $ 10,159,376 $ 11,675,454 $ 39,943,476 Deferred outflows of resources: Difference between actual and expected experience $ 494,146 $ - $ 235,622 $ 729,768 Changes of assumptions related to pensions $ - $ 1,003,209 $ 880,986 $ 1,884,195 Difference between projected and actual investment earnings $ - $ 148,886 $ 136,286 $ 285,172 Contributions subsequent to the measure date $ 365,682 $ 205,646 $ 283,487 $ 854,815Deferred outflows of resources: Difference between actual and expected experience $ 948,911 $ 309,455 $ - $ 1,258,366 Difference between projected and actual investment earnings $ 580,342 $ 141,194 $ 126,612 $ 848,148 Changes in proportion and differences between employer contributions and proportionate share of contributions $ 743,730 $ - $ - $ 743,730Pension expense $ 548,578 $ 1,254,338 $ 1,364,700 $ 3,167,616

FINANCIALS 57


NOTE 8 – PENSION PLANS (continued)

Arizona State Retirement System

Plan description

Substantially all full-time employees of the Authority (excluding fire and police personnel) participate in the Arizona State Retirement System (ASRS). The ASRS administers a cost-sharing multiple-employer defined benefit pension plan, a cost-sharing multiple-employer defined benefit health insurance premium benefit (OPEB) plan, and a cost-sharing multiple-employer defined benefit long term disability (OPEB) plan. The Arizona State Retirement System Board governs the ASRS according to the provisions of A.R.S. Title 38, Chapter 5, Articles 2 and 2.1. The ASRS issues a publicly available financial report that includes its financial statements and required supplementary information. The ASRS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to ASRS, P. O. Box 33910, Phoenix, AZ 85067-3910, calling 1-800-621-3778, or by visiting https://www.azasrs.gov/content/annual-reports.

September 30, 2014 PSPRS-Fire PSPRS-Police ASRS Department Department NetNet pension liabilities $ 17,795,379 $ 9,871,530 $ 11,093,386 $ 38,760,295 Deferred outflows of resources: Difference between actual and expected experience $ 904,413 $ (46,597) $ 133,614 $ 991,430 Changes of assumptions related to pensions $ - $ 1,374,988 $ 1,329,577 $ 2,704,565 Contributions subsequent to the measurement date $ 383,518 $ 131,214 $ 190,271 $ 705,003Deferred outflows of resources: Difference between actual and expected earnings on pension plan assets $ 3,111,862 $ 188,258 $ 168,816 $ 3,468,936 Changes in proportion and differences between employer contributions and proportionate share of contributions $ 502,167 $ - $ - $ 502,167Pension expense $ 952,696 $ 1,632,555 $ 1,774,559 $ 4,359,810




2015 2014Employee contribution rates: Retirement 11.48% 11.30% Long-term disability .12% .24% 11.60% 11.54%

Employee contribution rates: Retirement 10.89% 10.70% Health insurance premium benefit .59% .60% Long-term disability .12% .24% 11.60% 11.54%

Retirement benefits for members who joined the ASRS prior to September 13, 2013 are subject to automatic cost-of-living adjustments based on excess investment earnings. Members with a membership date on or after September 13, 2013 are not eligible for cost of living adjustments. Survivor benefits are payable upon a member’s death. For retired members, the survivor benefit is determined by the retirement benefit option chosen. For all other members, the beneficiary is entitled to the member’s account balance that includes the member’s contributions and employer’s contributions, plus interest earned.

In accordance with state statutes, annual actuarial valuations determine active member and employer contribution requirements. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. For the year ended June 30, 2015 and 2014, active ASRS members and the Authority were required by statute to contribute at the following actuarially determined rates on members’ annual covered payroll:

Years of service and agerequired to receive benefit

Final average salary is based on

Benefit percent per year of service

Before July 1, 2011

Sum of years and age equals 8010 years age 625 years age 50*

any years age 65

Highest 36 consecutive months oflast 120 months

2.1% to 2.3%

On or after July 1, 2011

30 years age 5525 years age 6010 years age 625 years age 50*

any years age 65

Highest 60 consecutive months oflast 120 months

2.1% to 2.3%

Initial membership date:

*with actuarially reduced benefits

Benefits provided - The ASRS provides retirement, health insurance premium supplement, long term disability, and survivor benefits. State statute establishes benefit terms. Retirement benefits are calculated on the basis of age, average monthly compensation, and service credit as follows:

FINANCIALS 59



The Authority’s contributions to the pension plan for the year ended June 30, 2015 and 2014 were $1,166,090 and $1,160,008, respectively, which included the required contributions for the health insurance premium benefit and long term disability.

Pension liability

At September 30, 2015 and 2014 the Authority reported a liability of $18,108,646 and $17,795,379 for its proportionate share of the ASRS’ net pension liability. The net pension liability was measured as of June 30, 2015 and 2014. (The total pension liability used to calculate the net pension liability was determined using update procedures to roll forward the total pension liability from an actuarial valuation as of June 30, 2013, to the measurement date of June 30, 2014.) The Authority’s proportion of the net pension liability was based on the Authority’s actual contributions to the plan relative to the total of all participating employers’ contributions for the years ended June 30, 2015 and 2014. The Authority’s proportion measured as of June 30, 2015 and 2014 were 0.116260% and 0.120267% respectively, which was a decrease of 0.004007%

For the years ended September 30, 2015 and 2014, the Authority recognized pension expense for ASRS of $548,578 and $952,696 respectively. At September 30, 2015, the Authority reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

September 30, 2015 September 30, 2014

Differences between expectedand actual experience $ 494,146 $ 948,911 $ 904,413 $ -Net difference between projectedand actual earnings on pensionplan investments 580,342 3,111,862Changes in proportion anddifferences between employer contributions and proportionate share of contributions - 743,730 502,167Contributions subsequent to themeasurement date 365,682 - 383,518 - $ 859,828 $ 2,272,983 $ 1,287,931 $ 3,614,029

Deferred outflows of resources

Deferred inflows of resources

Deferred outflows of resources

Deferred inflows of resources

The $365,682 reported as deferred outflows of resources related to ASRS pensions resulting from Authority contributions subsequent to the measurement date that will be recognized as a reduction of the net pension liability in the year ending September 30, 2016.




Other amounts reported as deferred outflows of resources and deferred inflows of resources related to ASRS pensions will be recognized in pension expense as follows:

The significant actuarial assumptions used to measure the total pension liability are as follows:

Actuarial valuation date June 30, 2015 Actuarial roll forward date June 30, 2014 Actuarial cost method Entry age normal Investment rate of return 8% Projected salary increases 3% - 6.75% Inflation 3% Permanent benefit increase Included Mortality rates 1994 GAM Scale BB

Actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the 5 year period ended June 30, 2012.

The long term expected rate of return on ASRS pension plan investments was determined to be 8.79% using a building block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation.

Year ending September 30,

2016 2017 2018 2019

$ 603,076 603,076

752,499 777,965

$ 2,709,616

FINANCIALS 61



Discount rate - The discount rate used to measure the ASRS total pension liability was 8%, which is less than the long term expected rate of return of 8.79%. The projection of cash flows used to determine the discount rate assumed that contributions from participating employers will be made based on the actuarially determined rates based on the ASRS Board’s funding policy, which establishes the contractually required rate under Arizona statute. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the Authority’s proportionate share of the ASRS net pension liability to changes in the discount rate - The following table presents the Authority’s proportionate share of the net pension liability calculated using the discount rate of 8%, as well as what the Authority’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (7%) or 1 percentage point higher (9%) than the current rate:

Current 1% decrease discount rate 1% increase (7%) (8%) (9%) Authority’s proportionate share of the net pension liability $ 23,728,515 $ 18,108,646 $ 14,257,195

Long-termexpected realrate of returnAsset Class Target Allocation

Equity 58% 3.94% Fixed Income 25% .93%Real estate 10% .42% Multi-asset class 5% .17% Commodities 2% .08%

Total 100% 5.54%

Inflation 3.25%

Expected Arithmetic nominal return 8.79%

The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Detailed information about the pension plan’s fiduciary net position is available in the separately issued ASRS financial report.


Arizona Public Safety Personnel Retirement System

Plan description

Employees of the Authority who are employed in either police or firefighting capacities and work at least 40 hours a week for more than 6 months a year participate in the Arizona Public Safety Personnel Retirement System (PSPRS). The PSPRS administers an agent multiple-employer defined benefit pension plan and an agent multiple-employer defined benefit health insurance premium benefit (OPEB) plan (agent plans). PSPRS is administered in accordance with Title 38, Chapter 5, Article 4 of the Arizona Revised Statutes. The PSPRS acts as a common investment and administrative agent that is jointly administered by the Board of Trustees (“the Board”) and 237 local boards. The PSPRS issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained by writing to Public Safety Personnel Retirement System, 3010 E. Camelback Road, Suite 200, Phoenix, AZ 85016, calling (602) 255- 5575, or by visiting: http://www.psprs.com/Admin_Investments_and_Finance/CAFR2015/2015%20CAFR.pdf.

Benefits Provided

The PSPRS provides retirement, health insurance premium supplement, disability, and survivor benefits. State statute establishes benefit terms. The calculation of retirement benefits for employees who became a member on or before December 31, 2011 commence the first day of the month following termination of employment and are based upon the following:

1. 20 years of credited service: 50 percent of the average monthly benefit compensation for the first 20 years of credited service.

2. Age 62 with 15 years of service, or 20 years of service with less than 20 years of credited service: 50 percent of the average monthly benefit compensation for the first 20 years of credited service. The pension is reduced by 4 percent per year for each year of credited service under 20 years.

3. 20 to 24.99 years of credited service: 50 percent of the average monthly benefits compensation for the first 20 years of credited service plus 2 percent of the average monthly benefits compensation for each year of credited service between 20 and 24.99.

4. 25 or more years of credited service: 50 percent of the average monthly benefit compensation for the first 20 years of credited service plus 2.5 percent of the average monthly benefit compensation for each year of credited service above 20 years - up to a maximum of 80 percent of the average monthly benefit compensation.

The calculation of retirement benefits for employees who became a member on or after January 1, 2012 commence the first day of the month following termination of employment and are based upon the following:

1. Age 52.5 with 25 years of service: 62.5 percent of the average monthly benefit compensation. Benefits will be reduced by 4 percent for each year of credited service under 25 years.

2. 25 or more years of service: 62.5 percent of the average monthly benefit compensation for the first 25 years of credited service plus 2.5 percent of the average monthly benefit compensation for each year over 25 years of credited service - up to a maximum of 80 percent of the average monthly benefit compensation. The pension is reduced by 4 percent per year for each year of credited service under 25 years with a pro-rata reduction for any fractional years.

The phrase “average monthly benefit compensation,” as it is used in the above discussion, is defined as the average of the highest 36 consecutive months of compensation within the last 20 years of credited service (for employees who became a member on or before December 31, 2011) or as the average of the highest 60 consecutive months of compensation within the last 20 years of credited service (for employees who became a member on or after January 1, 2012).



FINANCIALS 63



Disability benefits are calculated as follows:

Accidental Disability Retirement: 50% of average monthly compensation, or normal pension amount, whichever is greater.

Catastrophic Disability Retirement: 90% of average monthly compensation for the first 60 months. Thereafter, the benefit is the greater of 62.5% of average monthly compensation or the member’s accrued normal pension.

Ordinary Disability Retirement: A percentage of normal pension on employee’s credited service (maximum of 20 years divided by 20).

Survivor benefits are paid on behalf of an active member in the amount of 80 percent of the pension based on the calculation for an accidental disability retirement. If the member was killed in the line of duty, the benefit is 100 percent of the member’s average monthly benefit compensation. The benefit amount is allocated to the surviving spouse and, if applicable, eligible children. If there is no surviving spouse, and there is at least one eligible child, the guardian of the eligible child(ren) and the eligible child(ren) are the recipients of the benefit. If there is no surviving spouse or eligible child(ren), the member’s named beneficiary on file will receive the member’s accumulated contributions. Benefits are paid on behalf of an inactive, non-retired member to the member’s named beneficiary in the amount of the member’s accumulated contributions. Death benefits are paid on behalf of a retired member in a manner similar to an active member. The surviving spouse (if married for at least two consecutive years at the time of the member’s death) will receive 80 percent of the member’s pension benefit for lifetime. The surviving children and guardian provisions are the same as those regarding active members, with the exception that the percentages received are based upon the pension amount as opposed to the amounts referenced above for active members. If there is no surviving spouse or eligible child(ren), the member’s named beneficiary on file will receive the member’s accumulated contributions less the pension payments made to the member.

A retired member or survivor of a retired member may receive a benefit increase from PSPRS if monies are available. Effective July 1, 2013, and each July 1 thereafter, as long as there are no monies left to pay under the old benefit increase structure, a benefit increase will be issued as long as the following criteria have been met:

1. A retired member who became a member on or before December 31, 2011, or the survivor of a retired member, was receiving benefits on or before July 31 of the two previous years, OR was 55 or older on July 1 of the current year and receiving benefits on or before July 31 of the previous year.

2. A retired member who became a member on or after January 1, 2012, or the survivor of a retired member, was 55 or older on July 1 of the current year and is receiving benefits, OR the retired member was under 55 on July 1 of the current year, was receiving an accidental disability or a catastrophic disability retirement benefit and was receiving benefits on or before July 31 of the two previous years, OR a survivor was under 55 on July 1 of the current year, is the survivor of a member who was killed in the line of duty and was receiving benefits on or before July 31 of the two previous years.




The increase is contingent upon a total investment return of more than 10.5 percent for the prior fiscal year, and will be calculated as follows (if there are insufficient earnings to cover the maximum increases, the percentage increase is limited to the earnings available):

Fire Police 2015 2014 2015 2014

Employer contribution rates 11.05% 11.05% 11.05% 11.05% Employer contribution rates 73.55% 66.06% 50.12% 47.32% Employer contributions $ 527,805 $ 497,883 $ 614,539 $ 576,148

At June 30, 2015 the number of employees covered by the PSPRS agent pension plan benefit terms is as follows:

MaximumRatio of Actuarial Value of Assets to Liabilities increase 60-64% 2.00% 65-69% 2.50% 70-74% 3.00% 75-79% 3.50% 80% or more 4.00%

Fire Police Department % Department %

Retirees and beneficiaries 16 45.7% 18 45.0% Inactive, non-retired members 5 14.2% 5 12.5% Active members 14 40.1% 17 42.5% 35 40

Contributions and annual OPEB cost State statutes establish the pension contribution requirements for active PSPRS employees. In accordance with state statutes, annual actuarial valuations determine employer contribution requirements for PSPRS pension and health insurance premium benefits. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. Rates are a percentage of active members’ annual covered payroll.

For the Plan years ended June 30, 2015 and 2014 the Authority and active PSPRS members were required to contribute at the following rates, and the Authority’s contributions to the pension plan, which included the required contributions for the health insurance premium benefit, were as follows:

FINANCIALS 65

Fire Police 2015 2014 2015 2014

Net pension liability $ 10,159,376 $ 9,871,530 $ 11,675,454 $ 11,093,386

The health insurance premium portion of the contribution rate was actuarially set at 0.9% of covered payroll.

Pension liability

At September 30, 2015 and 2014, the Authority reported the following net pension liabilities for its PSPRS pension plans:

The net pension liabilities were measured as of June 30, 2015 and 2014 respectively, and the total pension liability used to calculate the net pension liability (asset) was determined by actuarial valuations at these dates.

The total pension liability as of June 30, 2014, reflects the following changes of benefit terms and actuarial assumptions:

• In February 2014, the Arizona Supreme Court affirmed a Superior Court ruling that a 2011 law that changed the mechanism for funding permanent benefit increases was unconstitutional. As a result, the plans changed benefit terms to reflect the prior mechanism for funding permanent benefit increases and revised actuarial assumptions to explicitly value future permanent benefit increases.

• The wage growth actuarial assumption was decreased from 4.5 percent to 4.0 percent.

Tucson Airport Authority Fire Department

Pension expense and deferred outflows/inflows of resources - For the years ended September 30, 2015, and 2014 the Authority recognized pension expense for PSPRS Fire of $1,254,338 and $1,632,555, respectively. At September 30, 2015 and 2014, the Authority reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:



September 30, 2015

Net Deferred Deferred outflows Deferred inflows Outflows of of resources of resources Resources

Differences between expected and actual experience $ - $ 309,455 $ (309,455)Changes in assumptions or other inputs 1,003,209 - 1,003,209Net difference between projected and actual earnings on pension plan investments 148,886 141,194 7,692Contributions subsequent to the measurement date 205,646 - 205,646

$ 1,357,741 $ 450,649 $ 907,092




Year ending June 30, 2016 2017 2018 2019 2020

Total

$ 277,266 277,266

168,935 (22,021) 0

$ 701,446

September 30, 2014


Differences between expected and actual experience $ - $ 46,597 $ (46,597)Changes in assumptions or other inputs 1,374,988 - 1,374,988Net difference between projected and actual earnings on pension plan investments - 188,258 (188,258)Contributions subsequent to the measurement date 131,214 - 131,214

$ 1,506,202 $ 234,855 $ 1,271,347

The $205,646 reported as deferred outflows of resources related to PSPRS pensions resulting from Authority contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending September 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to PSPRS pensions will be recognized in pension expense as follows:

FINANCIALS 67

Pension expense and deferred outflows/inflows of resources - For the years ended September 30, 2015, and 2014 the Authority recognized pension expense for PSPRS Police of $1,364,700 and $1,774,559, respectively. At September 30, 2015 and 2014, the Authority reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

September 30, 2015


Differences between expected and actual experience $ 235,622 $ - $ 235,622Changes in assumptions or other inputs 880,986 - 880,986Net difference between projected and actual earnings on pension plan investments 136,286 126,612 9,674Contributions subsequent to the measurement date 283,487 - 283,487

Total $ 1,536,381 $ 126,612 $ 1,409,769



Tucson Airport Authority Police Department

September 30, 2014


Differences between expected and actual experience $ 133,614 $ - $ 133,614Changes in assumptions or other inputs 1,329,577 - 1,329,577Net difference between projected and actual earnings on pension plan investments - 168,816 (168,816)Contributions subsequent to the measurement date 190,271 - 190,271

Total $ 1,653,462 $ 168,816 $ 1,484,647


Year ending June 30,

2016 2017 2018 2019 2020

Total

$ 533,495 515,670

39,82337,294

-

$ 1,126,282



The $283,487 reported as deferred outflows of resources related to PSPRS pensions resulting from Authority contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending September 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to PSPRS pensions will be recognized in pension expense as follows:

The total pension liability for the PSPRS Fire and Police Department plans in the June 30, 2015 and 2014 measurement was determined using the following actuarial assumptions:

Actuarial Cost Method Individual Entry Age Normal Asset Valuation Method Market Value of Assets Inflation 4.00% Salary increases 4.00%-8.00%, including inflation Investment rate of return 7.85%, net of investment and administrative expenses Mortality rates RP-2000 mortality table projected to 2015 using projection scale AA (adjusted by 105% for both males and females). Permanent benefit increase No explicit Assumed Permanent Benefit Increases Assumption

Actuarial assumptions used in the June 30, 2015 valuation were based on the results of an actuarial experience study for the 5 year period ended June 30, 2011.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These real rates of return are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation.

FINANCIALS 69

Asset Class Target Allocation

U.S. equity 16% 6.23% Non U.S. equity 14% 8.25% Credit opportunities 13% 7.08% Private equity 11% 9.50% Real estate 10% 4.48% GTAA 10% 4.38% Real assets 8% 4.77% Fixed income 7% 2.92% Absolute return 5% 4.11% Risk parity 4% 5.13% Short term investments 2% 0.75%

100%



The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table:

Long term expected real rate of return

Discount rate - The discount rate of 7.85% was used to measure the total pension liability. The projection of cash flows used to determine the PSPRS discount rate assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between the actuarially determined contribution rate and the member rate. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.


Tucson Airport Authority Fire Department Measurement Date, June 30, 2015 Reporting Date, September 30, 2015 Total Pension Plan Fiduciary Net Position Liability (a) Net Position (b) Liability (a)-(b) Balances, beginning of year $ 14,484,720 $ 4,613,190 $ 9,871,530 Changes for the year: Service cost $ 214,614 $ 214,614 Interest on the total pension liability 1,113,123 1,113,123 Changes of benefit terms - 0 Differences between expected and actual experience in the measurement of the pension liability (347,529) (347,529) Changes of assumptions - 0 Contributions - employer $ 527,805 (527,805) Contributions - employee 120,005 (120,005) Net investment income 164,399 (164,399) Benefit payments, including refunds to employee contributions (824,231) (824,231) 0 Pension plan adminitrative expense - (4,385) 4,385 Other - (115,462) 115,462 Net changes 155,977 (131,869) 287,846 Balances, end of year $ 14,640,697 $ 4,481,321 $ 10,159,376



Changes in the net pension liability (asset) -

FINANCIALS 71



Measurement Date, June 30, 2014 Reporting Date, September 30, 2014 Total Pension Plan Fiduciary Net Position Liability (a) Net Position (b) Liability (a)-(b) Balances, beginning of year $ 12,104,647 $ 4,507,922 $ 7,596,725 Changes for the year: Service cost $ 217,088 $ 217,088 Interest on the total pension liability 926,805 926,805 Changes of benefit terms 362,124 362,124 Differences between expected and actual experience in the measurement of the pension liability (59,196) (59,196) Changes of assumptions 1,746,767 1,746,767 Contributions - employer $ 497,883 (497,883) Contributions - employee 111,010 (111,010) Net investment income 570,917 (570,917) Benefit payments, including refunds to employee contributions (813,515) (813,515) - Other (net transfer) (261,027) 261,027 Net changes 2,380,073 105,268 2,274,805 Balances, end of year $ 14,484,720 $ 4,613,190 $ 9,871,530




Changes in the net pension liability (asset) - continued

Tucson Airport Authority Police Department Measurement Date, June 30, 2015 Reporting Date, September 30, 2015 Total Pension Plan Fiduciary Net Position Liability (a) Net Position (b) Liability (a)-(b) Balances, beginning of year $ 15,294,242 $ 4,200,856 $ 11,093,386 Changes for the year: Service cost $ 258,524 $ 258,524 Interest on the total pension liability 1,171,149 1,171,149 Changes of benefit terms - - Differences between expected and actual experience in the measurement of the pension liability 195,045 195,045 Changes of assumptions - - Contributions - employer $ 614,539 (614,539) Contributions - employee 280,628 (280,628) Net investment income 154,668 (154,668) Benefit payments, including refunds of employee contributions (1,008,807) (1,008,807) - Pension plan administrative expense (4,150) 4,150 Other (3,035) 3,035 Net changes 615,911 33,843 582,068 Balances, end of year $ 15,910,153 $ 4,234,699 $ 11,675,454

FINANCIALS 73



Changes in the net pension liability (asset) - continued

Measurement Date, June 30, 2014 Reporting Date, September 30, 2014 Total Pension Plan Fiduciary Net Position Liability (a) Net Position (b) Liability (a)-(b) Balances, beginning of year $ 12,578,918 $ 3,978,318 $ 8,600,600 Changes for the year: Service cost $ 256,981 $ 256,981 Interest on the total pension liability 965,854 965,854 Changes of benefit terms 342,709 342,709 Differences between expected and actual experience in the measurement of the pension liability 178,695 178,695 Changes of assumptions 1,778,168 1,778,168 Contributions - employer $ 576,148 (576,148) Contributions - employee 150,551 (150,551) Net investment income 511,958 (511,958) Benefit payments, including refunds to employee contributions (807,083) (807,083) - Other (net transfer) (209,036) 209,036 Net changes 2,715,324 222,538 2,492,786 Balances, end of year $ 15,294,242 $ 4,200,856 $ 11,093,386

Sensitivity of the Authority’s net pension liability to changes in the discount rate - The following table presents the Authority’s net pension liability (asset) calculated using the discount rate noted above, as well as what the Authority’s net pension liability (asset) would be if it were calculated using a discount rate that is 1 percentage point lower (6.85%) or 1 percentage point higher (8.85%) than the current rate:

Current 1% decrease discount rate 1% increase (6.85%) (7.85%) (8.85%) Authority’s net pension liability (asset) - Fire Department $ 11,833,953 $ 10,159,376 $ 8,755,327 Authority’s net pension liability (asset) - Police Department $ 13,455,111 $ 11,675,454 $ 10,182,549

The pension plan’s fiduciary net position has been determined on the same basis used by the pension plan. The financial statements of the PSPRS are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America that apply to government accounting of fiduciary funds including the Governmental Accounting Standards Board (GASB) Statements 28, 34, 37, 40, 43, 53, 63 and 67. Benefits and refunds are recognized when due and payable. Publicly traded investments are reported at fair values determined by the custodial agent. The agents’ determination of fair values includes, among other things, utilization of pricing services or prices quoted by independent brokers at current exchange rates. PSPRS derivative instruments which consist of futures, forward contracts, options, swaps, rights and warrants, are measured at fair value. The fair value of limited partnership investments are based on estimated current values and accepted industry practice.


Fair value is based on estimates and assumptions from information and representations provided by the respective general partners, in the absence of readily ascertainable market values. Short- term investments are reported at cost plus accrued interest, which approximates fair value. For investments where no readily ascertainable fair value exists, management, in consultation with their investment advisors, has determined the fair values for the individual investments based on anticipated maturity dates and current interest rates commensurate with the investment’s degree of risk. Detailed information about the pension plan’s fiduciary net position is available in the separately issued PSPRS financial report.

Agent plan OPEB actuarial assumptions - The health insurance premium benefit contribution requirements for the year ended June 30, 2015 were established by the June 30, 2013 actuarial valuations.

Actuarial valuations involve estimates of the reported amounts’ value and assumptions about the probability of events in the future. Amounts determined regarding the plans’ funded status and the annual required contributions are subject to continual revision as actual results are compared to past expectations and new estimates are made. The required schedule of funding progress for the health insurance premium benefit presented as required supplementary information provides multiyear trend information that shows whether the actuarial value of the plans’ assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits.

Projections of benefits are based on (1) the plan as the Authority and plans’ members understand it and include the types of benefits in force at the valuation date, and (2) the pattern of sharing benefit costs between the Authority and plans’ members to that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions designed to reduce short term volatility in actuarial accrued liabilities and the actuarial value of assets. The significant actuarial methods and assumptions used to establish the fiscal year 2015 contribution requirements are as follows:

Actuarial valuation date June 30, 2013 Actuarial cost method Entry age normal Amortization method Level Percentage of Payroll, Closed Remaining amortization period 23 years; if the actuarial value of assets exceeded the actuarial accrued liability, the excess was amortized over an open period of 20 years and applied as a credit to reduce the normal cost which otherwise would be payable. Asset valuation method 7-Year smoothed market; 80%/120% market Investment rate of return 7.85%, net of investment and administrative expenses Projected salary increases 4.5% - 8.5% including inflation Price inflation 3.0% - 4.0% Experience-based table of rates that is specific to the type of eligibility condition. Last updated for the 2012 valuation pursuant to an experience study of the period July 1, 2006 - June 30, 2011. Retirement age Experience-based table of rates that is specific to the type of eligibility condition. Last updated for the 2012 valuation pursuant to an experience study of the period July 1, 2006 - June 30, 2011.

Mortality RP-2000 mortality table projected to 2015 using projection scale AA (adjusted by 105% for both males and females). Assumed future permanent benefit increases No explicit assumed permanent benefit increases assumption



FINANCIALS 75



Annual OPEB cost information for the health insurance premium benefit for the current and 2 preceding years follows:

Fire Department Percentage of Year ending Annual OPEB annual cost Net June 30 cost contributed OPEB obligation

2015 $ - 100% $ - 2014 - 100% - 2013 18,377 100% 233,122

Police Department Percentage of Year ending Annual OPEB annual cost Net June 30 cost contributed OPEB obligation

2015 $ 6,346 100% $ 16,631 2014 4,096 100% 3,804 2013 22,345 100% 270,355

Agent plan OPEB funded status - The health insurance premium benefit plans’ funded status as of the most recent valuation date, June 30, 2015 and 2014, follow.

Fire June 30, 2015 June 30, 2014 Actuarial value of assets (a) $ 327,320 $ 305,586 Actuarial accrued liability (AAL) (b) i. Retired members and beneficiaries 72,973 75,928 ii. DROP members 36,382 33,672 iii. Active members 98,405 87,756 Total 207,760 197,356

Unfunded AAL (UAAL) (b-a) $ (119,560) $ (108,230) Funded Ratio (a/b) 157.55% 154.84% Annual covered payroll (c) $ 1,098,649 $ 1,013,578 UAAL as a precentage of covered payroll (b-a) / c 0.00% 0.00%



NOTE 9 – OPERATING LEASES WITH LESSEES

The Authority is the lessor of various land, facilities and equipment within the Airport System. Lease contracts are generally written with noncancelable terms of up to 30 years. Costs and related accumulated depreciation of property under leases are not practically determinable as the majority of the leases relate only to portions of buildings.

A summary of minimum noncancelable rentals under operating leases at September 30, 2015 follows:

Year ending September 30, 2016 $ 15,047,221 2017 7,830,585 2018 4,167,204 2019 3,981,467 2020 3,194,211 Thereafter 14,984,323 $ 49,205,011


Police June 30, 2015 June 30, 2014 Actuarial value of assets (a) $ 278,833 $ 257,914 Actuarial accrued liability (AAL) (b) i. Retired members and beneficiaries 140,322 98,119 ii. DROP members 52,223 54,091 iii. Active members 102,919 109,508 Total 295,464 261,718

Unfunded AAL (UAAL) (b-a) $ 16,631 $ 3,804 Funded Ratio (a/b) 94.37% 98.55% Annual covered payroll (c) $ 1,364,568 $ 1,305,875 UAAL as a precentage of covered payroll (b-a) / c 1.22% 0.29%

Several lease agreements have provisions for contingent rentals calculated on the tenant’s gross revenue if greater than contractual minimum annual guarantees. The amount of contingent rental revenue under these leases totaled $569,756 and $704,791 for the years ended September 30, 2015 and 2014, respectively, and is included in concession revenues.

NOTE 10 – CONCENTRATION OF OPERATING REVENUES

Concession fees from the airport rental car operations amounted to approximately 13.65% and 14.3% of total operating revenues for the years ended September 30, 2015 and 2014, respectively. Net revenues from the airport parking lot operations amounted to approximately 14.7% and 14.7% of total operating revenues in the years ended September 30, 2015 and 2014, respectively.

NOTE 11 – PASSENGER FACILITY CHARGES

Passenger Facility Charges (PFCs) are collected in accordance with FAA regulations allowing airports to impose a charge on enplaning passengers. As described in the summary of significant accounting policies, the Authority was granted permission to begin collection of such charges in February 1998. The total amount of PFCs to be collected under this FAA approved application was based on the estimated costs of approved PFC projects. The FAA approval letter provided total aggregate collection authority of $101,234,420.

FINANCIALS 77

NOTE 11 – PASSENGER FACILITY CHARGES (continued)

In April 2006, the FAA approved an amendment to the approved PFC application. The amendment approved an increase in the collection level from $3 to $4.50 for the following projects of the Authority: terminal expansion, land acquisition for airport expansion and land acquisition for noise mitigation. In June 2006, the FAA approved an additional application to include the concourse renovation project. The total effect of approved applications and amendments results in total aggregate collection authority of $144,656,372. The increase in rate was effective October 1, 2006. During the years ended September 30, 2015 and 2014, the Authority earned PFCs of $6,010,676 and $6,135,127, respectively.

NOTE 12 – RISK MANAGEMENT

The Authority is exposed to various risks or losses related to torts, theft of, damage to and destruction of assets, errors and omissions, injuries to employees, and natural disasters. The Authority’s risk management activities include purchase of commercial insurance with standard deductibles for all significant insurable risks. There have been no significant reductions in insurance coverage in the last year. The amounts of settlements have not exceeded insurance coverage for the past four years. Other than for certain environmental remediation liabilities as discussed in Note 14, the financial statements do not include any liability for uninsured claims at September 30, 2015 and 2014.

Losses arising from claims and judgments are expensed when 1) it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements; and 2) the amount of the loss can be reasonably estimated.

NOTE 13 – COMMITMENTS

Commitments for contractual services for federally funded and other construction projects at September 30, 2015 totaled approximately $11,833,017. These commitments will be funded in whole or in part by federal and state grants of $7,562,482 and the Authority’s previously issued revenue bonds and Authority funds, as necessary, of $4,270,535.

NOTE 14 – ENVIRONMENTAL MATTERS, LITIGATION AND CONTINGENCIES

Groundwater Remediation (“TARP Consent Decree”) and Soils/Vadose Zone Remediation (“Soils Consent Decree”):

In 1991, the Authority and other obligated parties entered into the Tucson Airport Remediation Project (TARP) Consent Decree with the Environmental Protection Agency (EPA). The TARP Consent Decree requires performance of and funding for certain groundwater remediation activities.

In 1999, the Authority and other obligated parties entered into another Consent Decree (the “Soils Consent Decree”) with the EPA. The Soils Consent Decree requires performance of and funding for certain soil and shallow groundwater remediation activities on Authority property.

In 1999, the Authority and several other parties entered into a settlement pursuant to which other parties paid certain amounts to TAA, there was an allocation of responsibility for obligations under both of the above-referenced Consent Decrees, and the Authority funded a trust for the purpose of providing primary funding for the Authority’s financial responsibilities under the Consent Decrees. The Trust is referred to as the “Environmental Remediation Trust.”

As a result of the 1999 settlement, the Authority is obligated to pay 100% of the costs associated with the TARP Consent Decree and 80% of the costs of the work required under the Soils Consent Decree. Two other parties are each obligated to pay 10% of the costs of the work required under the Soils Consent Decree, for a combined obligation of 20%. It is assumed that in the future these two parties will continue to meet their payment obligations for purposes of calculating the Authority’s environmental liability.

The liability for remediation obligations is calculated using the expected cash flow technique, which measures the liability as the sum of probability-weighted amounts in a range of possible expected amounts - the estimated mean or average. This technique uses all expectations about possible cash flows. Estimated future cash outlays are based on existing technologies currently in use to perform the required remediation, stated at current value. These outlays include all operation and maintenance costs, remediation monitoring costs (including post-remediation monitoring), regulatory




oversight costs, and facility construction costs. These costs are subject to potentially significant future price increases or decreases for materials, utilities and labor.

Changes in the estimated environmental remediation liability for the years ended September 30, 2015 and 2014 follow:

1,4 Dioxane Remedial Investigation and Feasibility Study

In a letter dated July 17, 2008, the U.S. EPA requested that the Authority, the City of Tucson, the U.S. Air Force, Boeing Corporation and Raytheon Corporation conduct a Remedial Investigation and Feasibility Study regarding 1,4 Dioxane in the regional groundwater aquifer near Tucson International Airport. This contaminant is not addressed in or covered by the TARP Consent Decree. The Authority has taken the position that it is not responsible for this contamination and another party has agreed to perform a substantial portion of the work demanded. The Authority is currently unable to determine the probability of an unfavorable outcome, if any, related to this matter.

Landfill Investigation

On April 18, 2007, the Arizona Department of Environmental Quality (“ADEQ”) sent the Authority a request for information in connection with ADEQ’s investigation of groundwater contamination near the Broadway North Landfill (“BNL”) in Tucson, which is part of the Broadway-Pantano Water Quality Assurance Fund Registry Site (“Site”). Similar requests were also sent to many other entities. The request related to waste purportedly generated by the Authority and its tenants at Tucson International Airport and Ryan Airfield between 1961 and 1972 and that ADEQ alleged may have been transported to BNL. On May 15, 2007, ADEQ sent a letter to the Authority and many other entities notifying each entity that it may be a responsible party for the Site and that a remedial investigation and feasibility study designed to identify a remedy were being conducted. The Authority is unable to determine the probability of an unfavorable outcome, if any, related to this matter.

Federal and State Grants

All federal and state grants are subject to audit by the granting agencies for compliance with applicable grant requirements. The Authority anticipates that the amount, if any, of disallowed grant expenditures in the event of granting agency audits would be immaterial.

Other Contingencies

The Authority is involved in other claims in the ordinary course of business. In the opinion of management, based on consultations with legal counsel, these matters are considered immaterial to the Authority or will be covered by insurance.

The Authority has significant contracts and leases that include contingent amounts due to the Authority based upon revenues of the lessees and concessionaires. The Authority monitors such agreements and includes adjustments in the

NOTE 14 – ENVIRONMENTAL MATTERS, LITIGATION AND CONTINGENCIES (continued)

2015 2014

Environmental remediation liability, beginning of year $ 27,132,843 $ 28,742,863 Current year expense 421,500 1,120,109 Investment earnings on Environmental Remediation Trust assets 0 5 Current year payments (2,341,865) (2,730,134) Environmental remediation liability, end of year $ 25,212,478 $ 27,132,843 Environmental remediation liability: Current - payable from restricted assets $ 234,538 $ 501,404 Current - payable from unrestricted assets 3,166,783 3,336,812 Long-term - payable from unrestricted assets 21,811,157 23,294,627 $ 25,212,478 $ 27,132,843

FINANCIALS 79

revenues earned under the contracts when such amounts are collected or a negotiated settlement has been reached with the respective lessee/concessionaire.

NOTE 15 – PRIOR PERIOD ADJUSTMENT

GASB Statement 51 requires that certain easements acquired be classified for financial statement purposes as Intangible assets. The Authority under grants from the Federal Aviation Administration provided sound insulation improvements to properties within noise zones around Tucson International Airport. In consiteration of the improvements property owners granted a permanent air navigation easement to Tucson Airport Authority for air space associated with their property. These costs were previously capitalized as land or depreciable land improvements. A prior year adjustment has been made to reclassify these costs as intangible, non-depreciable assets.

Generally under GASB 34 costs incurred to prepare studies or plans should be expensed as incurred. The Authority has previously capitalized these costs including such items as Master Plans and FAA Part 150 Sound Studies. A prior period adjustment has been made to retoactively expense such studies or plans.

The following is a summary of these changes:

NOTE 16 – CHANGE IN METHOD OF ACCOUNTING FOR PENSIONS

On October 1, 2013, the Authority changed its accounting method for pensions, as required by GASB Statement No. 68, Accounting and Financial Reporting for Pensions - an Amendment of GASB Statement No. 27, which replaces the requirements of previously issued statements as they relate to governments that provide pensions through pension plans administered by trusts or similar arrangements that meet certain criteria. This statement requires governments providing defined benefit pensions to recognize their long-term obligation for pension benefits as a liability. The Authority now reports in its financial statements a net pension liability that represents the difference between the total pension liability and the pension plan’s fiduciary net position. Previously the Authority recognized only the expense of minimum contributions required under the plan’s most recent actuarial valuation and a liability for contributions withheld not remitted at the end of a reporting period.

Issued in November 2013, GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - an Amendment of GASB Statement No. 68, amends GASB Statement No. 68 to require that, at transition, a government recognize a beginning deferred outflow of resources for its pension contributions, if any, made subsequent to the measurement date of the beginning net pension liability.

The following financial statement line items for fiscal year 2014 were affected by the change in accounting method:

Net position, beginning of year $ 337,764,886 Change in accounting principle as a result of implementation of GASB Statement No. 68 (36,957,054)

Net position, end of year $ 300,807,832

NOTE 14 – ENVIRONMENTAL MATTERS, LITIGATION AND CONTINGENCIES (continued)


GASB 51 GASB 34 Net Correction Correction Adjustment Capital assets not depreciated $ 822,536 $ 822,536Capital assets depreciated, net (137,089) $ (325,594) (462,683) Net investment in capital assets $ 685,446 $ (325,594) $ 359,852 Prior period adjustment - increase (decrease) in net position $ 685,446 $ (325,594) $ 359,852


Schedule of the Authority’s Proportionate Share of the Net Pension Liability Cost Sharing Plan (ASRS) (2013 - 2006 information not available)

Reporting date (September 30) 2015 2014 2013 2012 (Measurement date (June30)) (2015) (2014) (2013) (2012)

Authority’s proportion of the net pension liability 0.116260% 0.120267% - % - % Authority’s proportionate share of the net pension liability 18,108,646 17,795,379 - % - % Authority’s covered payroll 10,052,500 10,000,069 - % - % Authority’s proportionate share of the net pension liability as a percentage of its covered employee payroll 180.14% 177.03% - % - % Plan fiduciary net position as a percentage of total pension liability 68.08% 69.49% - % - %

FINANCIALS 81

2011 2010 2009 2008 2007 2006 (2011) (2010) (2009) (2008) (2007) (2006) - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - %


Multiyear Schedule of Changes in Net Pension Liability (Asset) and Related Ratios Agent Retirement Plan (PSPRS) – Fire Department (2013 - 2006 information not available)


Total pension liabilityService cost $ 214,614 $ 217,088 $ - $ -Interest on total pension liability 1,113,123 926,805 - -Benefit changes - 362,124 - -Difference between expected and actual experience (347,529) (59,196) - -Assumption changes - 1,746,767 - -Benefit payments, including refunds of employee contributions (824,231) (813,515) - - Net change in total pension liability 155,977 2,380,073 - - Total pension liability, beginning 14,484,720 12,104,647 - - Total pension liability, ending (a) $ 14,640,697 $ 14,484,720 $ - $ -

Plan fiduciary net position Contributions - employer $ 527,805 $ 497,883 $ - $ -Contributions - employee 120,005 111,010 - -Pension plan net investment income 164,399 570,917 - - Benefit payments, including refunds of employee contributions (824,231) (813,515) - - Pension plan administrative expense (4,385) - - - Other (115,462) (261,027) - - Net change in fiduciary net position (131,869) 105,268 - - Plan fiduciary net position, beginning 4,613,190 4,507,922 - - Plan fiduciary net position, ending (b) $ 4,481,321 $ 4,613,190 $ - $ - Net pension liability (asset), ending (a) - (b) $ 10,159,376 $ 9,871,530 $ - $ - Plan fiduciary net position as a percentage of total pension liability 30.61% 31.85% - % - % Covered valuation payroll $ 1,098,649 $ 1,013,577 $ - $ - Net pension liability as a percentage of covered valuation payroll 924.72% 973.93% - % - %

FINANCIALS 83

2011 2010 2009 2008 2007 2006 (2011) (2010) (2009) (2008) (2007) (2006) $ - $ - $ - $ - $ - $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

$ - $ - $ - $ - $ - $ - - % - % - % - % - % - % $ - $ - $ - $ - $ - $ - - % - % - % - % - % - %


Multiyear Schedule of Changes in Net Pension Liability (Asset) and Related Ratios Agent Retirement Plan (PSPRS) – Police Department (2013 - 2006 information not available)


Total pension liabilityService cost $ 258,524 $ 256,981 $ - $ -Interest on total pension liability 1,171,149 965,854 - -Benefit changes - 342,709 - -Difference between expected and actual experience 195,045 178,695 - -Assumption changes - 1,778,168 - -Benefit payments, including refunds of employee contributions (1,008,807) (807,083) - - Net change in total pension liability 615,911 2,715,324 - - Total pension liability, beginning 15,294,242 12,578,918 - - Total pension liability, ending (a) $ 15,910,153 $ 15,294,242 $ - $ -

Plan fiduciary net position Contributions - employer $ 614,539 $ 576,148 $ - $ -Contributions - employee 280,628 150,551 - -Pension plan net investment income 154,668 511,958 - - Benefit payments, including refunds of employee contributions (1,008,807) (807,083) - - Pension plan administrative expense (4,150) - - - Other (3,035) (209,036) - - Net change in fiduciary net position 33,843 222,538 - - Plan fiduciary net position, beginning 4,200,856 3,978,318 - - Plan fiduciary net position, ending (b) $ 4,234,699 $ 4,200,856 $ - $ - Net pension liability (asset), ending (a) - (b) $ 11,675,454 $ 11,093,386 $ - $ - Plan fiduciary net position as a percentage of total pension liability 26.62% 27.47% - % - % Covered valuation payroll $ 1,364,568 $ 1,305,875 $ - $ - Net pension liability as a percentage of covered valuation payroll 855.62% 849.50% - % - %

FINANCIALS 85

2011 2010 2009 2008 2007 2006 (2011) (2010) (2009) (2008) (2007) (2006) $ - $ - $ - $ - $ - $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

$ - $ - $ - $ - $ - $ - - % - % - % - % - % - % $ - $ - $ - $ - $ - $ - - % - % - % - % - % - %


Multiyear Schedule of Pension Contributions (2013 - 2006 information not available)

Reporting date (September 30) 2015 2014 2013 2012 (Measurement date (June 30)) (2014) (2013) (2012) (2011)

Arizona State Retirement System (ASRS)Statutorily required contribution $ 1,166,090 $ 1,160,008 $ - $ - Contributions in relation to the contractually required contribution 1,166,090 1,160,008 - - Contribution deficiency (excess) $ - $ - $ - $ - Authority’s covered employee payroll $ 10,052,500 $ 10,052,062 $ - $ -Contributions as a percentage of covered employee payroll 11.60% 11.54% - -

Public Safety Personnel Retirement System (PSPRS) – Fire DepartmentActuarially determined contribution $ 527,805 $ 497,883 $ - $ - Contributions in relation to the actuarially determined contribution 527,805 $ 497,883 $ - $ - Contribution deficiency (excess) $ - $ - $ - $ -

Authority’s covered employee payroll $ 1,098,649 $ 1,013,577 - -Contributions as a percentage of covered employee payroll 48.04% 49.12% - -

Public Safety Personnel Retirement System (PSPRS) – Police DepartmentActuarially determined contribution $ 614,539 $ 576,148 $ - $ - Contributions in relation to the actuarially determined contribution 614,539 $ 576,148 $ - $ - Contribution deficiency (excess) $ - - - -

Authority’s covered employee payroll $ 1,364,568 $ 1,305,875 - -Contributions as a percentage of covered employee payroll 45.04% 44.12% - -

FINANCIALS 87

2011 2010 2009 2008 2007 2006 (2010) (2009) (2008) (2007) (2006) (2005)

$ - $ - $ - $ - $ - $ - - - - - - - $ - $ - $ - $ - $ - $ -

$ - $ - $ - $ - $ - $ - - - - - - -

$ - $ - $ - $ - $ - $ -

$ - - - - - - $ - $ - $ - $ - $ - $ -

- - - - - -

- - - - - -

$ - $ - $ - $ - $ - $ -

$ - - - - - - - - - - - -

- - - - - - - - - - - -


NOTE 1 – ACTUARIALLY DETERMINED CONTRIBUTION RATES

Actuarial determined contribution rates for PSPRS are calculated as of June 30 two years prior to the end of the fiscal year in which contributions are made. The actuarial methods and assumptions used to establish the contribution requirements are as follows:

Actuarial valuation date June 30, 2014 Actuarial cost method Entry age normal Amortization method Level Percentage of Payroll, Closed Remaining amortization period 23 years; if the actuarial value of assets exceeded the actuarial accrued liability, the excess was amortized over an open period of 20 years and applied as a credit to reduce the normal cost which otherwise would be payable. Asset valuation method 7-Year smoothed market; 80%/120% market Investment rate of return 7.85%, net of investment and administrative expenses Projected salary increases 4.5% 8.5% includes inflation 4.0% Experience-based table of rates that is specific to the type of eligibility condition. Last updated for the 2012 valuation pursuant to an experience study of the period July 1, 2006 -June 30, 2011. Retirement age Experience-based table of rates that is specific to the type of eligibility condition. Last updated for the 2012 valuation pursuant to an experience study of the period July 1, 2006 - June 30, 2011. Mortality RP-2000 mortality table projected to 2015 using projection scale AA (adjusted by 105% for both males and females). Assumed future permanent benefit increases No explicit assumed permanent benefit increases assumption

NOTE 2 – FACTORS THAT AFFECT THE IDENTIFICATION OF TRENDS

Beginning in fiscal year 2014, PSPRS established separate funds for pension benefits and health insurance premium benefits. Previously, the plan recorded both pension and health insurance premium contributions in the same Pension Fund. During fiscal year 2014, the plan transferred prior-year health insurance premium benefit contributions that exceeded benefit payments from the plan’s Pension Fund to the new Health Insurance Fund.

Notes to Required Supplementary Information September 30, 2015 and 2014

STATISTICAL 91

Statistical Section

TABLE OF CONTENTS Pages

Financial Trends 92-93 These schedules contain trend information to help the reader understand how the Authority’s financial performance and well-being have changed over time.

Revenue Capacity 94-97 These schedules contain information to help the reader assess the factors affecting the Authority’s ability to generate its airline and non-airline revenues.

Debt Capacity 98-101 These schedules present information to help the reader assess the affordability of the Authority’s current levels of outstanding debt and its ability to issue additional debt in the future.

Demographic and Economic Information 102-107 These schedules offer demographic and economic indicators to help the reader understand the environment within which the Authority’s financial activities take place and to help make comparisons over time with other airports.

Operating Information 108-118 These schedules contain information about the Authority’s operations and resources to help the reader understand how its financial information relates to the services the Authority provides and the activities it performs.


(1) Beginning with the year ending September 30, 2008 environmental remediation expenses are reported in accordance with GASB Statement No. 49, Accounting and Reporting for Pollution Remediation Obligations. See Note 15 for additional details. Beginning net position for the year ending September 30, 2008 has been restated to reflect this change.

Source: Authority audited financial statements.

Net Position and Changes in Net PositionFiscal Years Ended September 30

2006 2007 2008 2009Operating revenues Landing fees $ 3,271,027 $ 4,091,446 $ 4,514,982 $ 3,955,954 Space rentals 13,284,485 13,677,431 14,982,283 14,642,735 Land rent 2,407,852 2,410,087 2,358,601 2,485,048 Concession revenue 15,048,512 17,706,891 18,082,017 15,914,805 Product sales 4,762,575 5,079,304 5,434,965 2,959,860 Airport services 3,433,166 3,257,465 3,567,743 3,244,457 Other operating revenues 5,197,505 5,044,216 6,120,531 4,308,162 Total operating revenues 47,405,122 51,266,840 55,061,122 47,511,021

Nonoperating revenues Interest income 2,830,181 4,303,866 3,758,394 1,947,288 Passenger facility charges 5,510,943 8,837,539 8,564,157 7,221,319 Other nonoperating revenues 153,626 6,289 (128,747) 590,487 Total nonoperating revenues 8,494,750 13,147,694 12,193,804 9,759,094

Total revenues 55,899,872 64,414,534 67,254,926 57,270,115

Operating expenses Personnel expenses 17,869,467 18,726,957 19,436,788 19,289,037 Contractual services 5,858,967 5,981,561 6,700,706 6,268,927 Materials and supplies 1,432,059 1,448,754 1,604,514 1,197,635 Cost of product sales 3,403,189 3,800,984 4,320,579 2,108,804 Other operating expenses 1,573,256 1,629,556 1,671,420 1,346,920 Depreciation and amortization 11,522,975 11,530,943 13,470,556 16,530,294 Total operating expenses 41,659,913 43,118,755 47,204,563 46,741,617

Nonoperating expenses Interest expense and fiscal charges 4,505,016 4,173,111 3,714,983 4,872,368 Environmental remediation expenses (1) 1,120,745 1,960,058 599,092 6,128,082 Other nonoperating expenses - 14,008 14,491 26,950 Total nonoperating expenses 5,625,761 6,147,177 4,328,566 11,027,400

Total expenses 47,285,674 49,265,932 51,533,129 57,769,017

Capital contributions 13,483,783 15,197,348 8,765,633 9,196,017Special item - Loss on asset impairment (3,071,953) (17,208) (34,460) (14,063) Increase in net position $ 19,026,028 $ 30,328,742 $ 24,452,970 $ 8,683,052

Net position at year-end (1) Net investment in capital assets $ 152,760,570 $ 158,023,312 $ 168,169,113 $ 176,927,712 Restricted 9,919,281 17,902,932 21,705,586 26,738,088 Unrestricted 59,004,578 76,086,927 76,554,134 71,446,085Total net position $ 221,684,429 $ 252,013,171 $ 266,428,833 $ 275,111,885

STATISTICAL 93

2010 2011 2012 2013 2014 2015 $ 3,716,258 $ 3,218,611 $ 3,065,212 $ 2,727,682 $ 2,677,840 $ 2,638,511 14,271,708 14,464,321 14,404,808 14,541,598 14,712,712 15,516,879 2,632,103 2,694,612 2,639,679 2,684,589 2,663,514 2,767,584 16,451,297 16,978,230 16,717,118 14,234,828 14,442,602 14,458,462 3,111,248 3,386,663 2,624,936 1,000,111 475,582 223,161 3,997,120 4,016,841 3,626,002 3,069,561 3,338,100 3,787,935 4,577,805 4,634,781 4,764,771 4,336,606 3,040,508 2,594,253 48,757,539 49,394,059 47,842,526 42,594,975 41,350,858 41,986,785

1,104,984 850,527 757,378 733,777 1,003,767 1,383,045 7,418,447 7,064,714 6,884,959 6,193,285 6,135,127 6,010,676 (263,931) 97,930 7,813 (466,024) 655,988 576,808 8,259,500 8,013,171 7,650,150 6,461,038 7,794,882 7,970,529

57,017,039 57,407,230 55,492,676 49,056,013 49,145,740 49,957,314 18,338,923 18,565,829 18,813,878 18,855,823 21,271,873 19,945,414 6,064,411 6,301,918 5,759,286 6,321,777 5,843,202 6,064,007 1,264,250 1,390,653 1,405,494 1,348,952 1,343,790 1,271,755 2,260,029 2,612,723 2,063,364 851,930 421,204 194,121 1,090,153 1,274,401 1,244,705 1,177,404 2,632,370 914,491 16,783,060 15,298,186 15,386,500 16,472,711 15,860,805 16,577,216 45,800,826 45,443,710 44,673,227 45,028,597 47,373,244 44,967,004

4,591,809 4,252,272 3,373,283 3,048,133 2,787,713 2,667,488 4,707,923 834,444 1,420,602 1,469,875 1,120,109 421,500 - 1,896 13,216 15,714 - 280 9,299,732 5,088,612 4,807,101 4,533,722 3,907,822 3,089,268

55,100,558 50,532,322 49,480,328 49,562,319 51,281,066 48,056,272

15,868,166 8,606,611 12,633,202 13,542,280 26,622,392 15,074,095 (1,891,123) (403,565) - - - -

$ 15,893,524 $ 15,077,954 $ 18,645,550 $ 13,035,974 $ 24,487,065 $ 15,074,095

$ 188,439,666 $ 198,997,844 $ 208,795,492 $ 220,212,684 $ 236,631,507 $ 247,391,638 29,259,452 31,135,480 33,221,914 32,995,119 34,237,052 36,709,046 73,306,291 75,950,039 82,711,507 84,557,084 54,786,190 58,529,202 $ 291,005,409 $ 306,083,363 $ 324,728,913 $ 337,764,887 $ 325,654,749 $ 342,629,886


Source: Authority audited financial statements and records.

Principal Revenue SourcesFiscal Years Ended September 30

2006 2007 2008 2009Passenger airline rates and charges Landing fees $ 2,895,754 $ 3,652,290 $ 4,065,168 $ 3,530,022 Terminal rentals 8,154,409 8,374,134 8,601,069 8,408,438 Security fees 1,048,764 869,004 968,220 1,152,120 Terminal use fees 33,477 32,017 50,262 26,379 Custodial, equipment and parking 613,293 447,692 475,761 360,384 Total passenger airline rates and charges 12,745,697 13,375,137 14,160,480 13,477,343

Concession revenues Parking lots 7,045,309 7,802,071 8,276,347 6,355,839 Rental cars 5,949,881 7,249,854 6,930,285 7,100,966 News and gift 816,263 785,138 869,755 742,644 Food and beverage 675,307 1,117,886 1,228,100 1,015,971 Other 561,752 751,942 777,530 699,386 Total concession revenues 15,048,512 17,706,891 18,082,017 15,914,806

Other operating revenues Space rental 4,290,870 4,665,758 5,704,270 5,617,955 Land rent 2,407,852 2,410,087 2,358,601 2,485,048 Tenant finishes 470,053 330,270 330,270 330,270 Cargo airline landing fees 306,016 309,500 345,236 298,302 Air cargo space rentals 369,153 307,269 288,308 286,072 Fuel flowage 2,645,255 2,648,461 2,780,578 1,989,537 TSA reimbursements 329,951 473,784 503,811 534,701 Rental car customer facility charges 1,096,273 1,043,219 1,421,868 1,105,380 General aviation product sales 4,762,575 5,079,304 5,434,965 2,959,860 Other 2,932,915 2,917,160 3,650,718 2,511,747 Total other operating revenues 19,610,913 20,184,812 22,818,625 18,118,872

Total operating revenues 47,405,122 51,266,840 55,061,122 47,511,021

Nonoperating revenues Interest income 2,830,181 4,303,866 3,758,394 1,947,288 Passenger facility charges 5,510,943 8,837,539 8,564,157 7,221,319 Other nonoperating revenues 153,626 6,289 (128,747) 590,487 Total nonoperating revenues 8,494,750 13,147,694 12,193,804 19,759,094

Total revenues $ 55,899,872 $ 64,414,534 $ 67,254,926 $ 57,270,115

STATISTICAL 95

2010 2011 2012 2013 2014 2015

$ 3,319,897 $ 2,919,614 $ 2,787,533 $ 2,442,338 $ 2,374,308 $ 2,276,000 8,183,398 8,444,687 8,604,629 8,718,422 8,526,226 9,031,797 1,780,152 1,757,292 1,673,772 1,620,612 1,683,084 2,168,184 18,579 - - - - - 348,516 353,069 295,335 281,127 290,848 266,689 13,650,542 13,474,662 13,361,269 13,062,499 12,874,466 13,742,670

6,142,297 6,305,069 6,299,860 5,889,802 6,091,415 6,192,931 7,701,287 8,157,476 7,941,530 5,883,762 5,909,460 5,733,134 755,931 707,181 677,861 675,724 711,183 708,067 1,079,669 1,117,322 1,118,681 1,111,483 1,095,263 1,165,119 772,112 691,181 679,186 674,057 635,281 659,211 16,451,296 16,978,229 16,717,118 14,234,828 14,442,602 14,458,462

5,597,873 5,541,202 5,315,138 5,305,856 5,724,956 6,030,053 2,632,103 2,694,612 2,639,679 2,684,589 2,663,514 2,767,584 224,621 249,221 226,888 224,858 224,858 224,858 232,481 200,488 203,776 208,659 207,482 206,601 265,816 229,211 258,153 292,462 236,672 230,171 2,173,138 2,033,772 1,949,201 2,042,185 897,339 405,135 506,675 476,118 527,436 413,479 423,100 425,099 1,100,777 1,148,769 1,168,421 1,106,892 1,105,439 1,173,263 3,111,248 3,386,663 2,624,936 1,000,111 475,582 223,161 2,810,969 2,981,112 2,850,511 2,018,557 2,074,848 2,099,728 18,655,701 18,941,168 17,764,139 15,297,648 14,033,790 13,785,653

48,757,539 49,394,059 47,842,526 42,594,975 41,350,858 41,986,785

1,104,984 850,527 757,378 733,777 1,003,767 1,383,045 7,418,447 7,064,714 6,884,959 6,193,285 6,135,127 6,010,676 (263,931) 97,930 7,813 (466,024) 655,988 576,808 8,259,500 8,013,171 7,650,150 6,461,038 7,794,882 7,970,529

$ 57,017,039 $ 57,407,230 $ 55,492,676 $ 49,056,013 $ 49,145,740 $ 49,957,314


2006 2007 2008 2009Signatory airlines Landing fee (per 1,000 lbs.) $ 1.18 $ 1.40 $ 1.51 $ 1.65 Ticketing space (per sq. ft. per year) $ 63.87 $ 67.44 $ 67.44 $ 71.44 Baggage claim (per sq. ft. per year) $ 60.57 $ 63.95 $ 63.95 $ 67.74 Baggage makeup (per sq. ft. per year) $ 38.32 $ 40.46 $ 40.46 $ 42.86 Baggage claim office (per sq. ft. per year) $ 63.87 $ 67.44 $ 67.44 $ 71.44 Operations space (per sq. ft. per year) $ 54.27 $ 57.30 $ 57.30 $ 60.70 Hold room (per sq. ft. per year) $ 54.27 N.A. N.A. N.A. Hold room (per gate per year) N.A. $ 98,333.04 $ 98,333.04 $ 104,163.41 Aircraft parking position (per gate per year) $ 6,689.28 $ 7,055.18 $ 7,055.18 $ 7,473.50

Parking Hourly lot (per hour) $ 2.00 $ 2.00 $ 2.00 $ 2.00 Daily lot (per day) $ 8.00 $ 9.00 $ 9.00 $ 9.00 Garage (per day Oct - Mar) N.A. N.A. $ 9.00 $ 9.00 Garage (per day Apr - Sep) N.A. $ 13.00 $ 13.00 $ 11.00 Economy uncovered (per day) $ 4.00 $ 4.00 $ 4.00 $ 4.00 Economy covered (per day Oct. - Mar.) $ 6.00 $ 6.00 $ 6.00 $ 5.00 Economy covered (per day Apr. - Sep.) $ 8.00 $ 8.00 $ 8.00 $ 6.00

Rental car privilege fee (% of gross receipts) On-airport operators 10.0% 10.0% 10.0% 10.0% Off-airport operators 7.5% 10.0% 10.0% 10.0%

Rates and ChargesFiscal Years Ended September 30

N.A.: Not applicable.

Source: Authority records.

2006 2007 2008 2009Passenger airline rates and charges as a percentage of total operating revenues 26.9% 26.1% 25.7% 28.4%

Concession revenues as a percentage of total operating revenues 31.7% 34.5% 32.8% 33.5%

Non-passenger airline revenues as a percentage of total operating revenues 73.1% 73.9% 74.3% 71.6%

Enplaned passengers 2,120,996 2,195,493 2,202,373 1,837,175

Airline cost per enplaned passenger $ 6.01 $ 6.09 $ 6.43 $ 7.34

Concession revenues per enplaned passenger $ 7.10 $ 8.07 $ 8.21 $ 8.66

Operating revenues per enplaned passenger $ 22.35 $ 23.35 $ 25.00 $ 25.86

Total revenues per enplaned passenger $ 26.36 $ 29.34 $ 30.54 $ 31.17

Principal Revenue Source RatiosFiscal Years Ended September 30

Source: Enplaned passengers as reported by airlines.

STATISTICAL 97

2010 2011 2012 2013 2014 2015

$ 1.55 $ 1.35 $ 1.32 $ 1.31 $ 1.41 $ 1.31 $ 71.44 $ 73.86 $ 73.86 $ 76.30 $ 76.30 $ 78.81 $ 67.74 $ 70.04 $ 70.04 $ 72.36 $ 72.36 $ 74.74 $ 23.80 $ 24.61 $ 24.61 $ 25.42 $ 25.42 $ 26.26 $ 71.44 $ 73.86 $ 73.86 $ 76.30 $ 76.30 $ 78.81 $ 60.70 $ 62.76 $ 62.76 $ 64.84 $ 64.84 $ 66.97. N.A. N.A. N.A. N.A. N.A. N.A. $ 105,152.00 $ 107,700.75 $ 107,700.75 $ 111,263.62 $ 111,265.62 $ 114,926.26 $ 7,473.50 $ 7,726.84 $ 7,726.84 $ 7,982.45 $ 7,982.60 $ 8,245.20

$ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 9.00 $ 9.00 $ 9.00 $ 9.00 $ 9.00 $ 9.00 $ 9.00 $ 9.00 $ 9.00 $ 9.00 $ 9.00 $ 9.00 $ 9.00 $ 9.00 $ 9.00 $ 9.00 $ 9.00 $ 9.00 $ 4.00 $ 4.00 $ 4.00 $ 4.00 $ 4.00 $ 4.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%

2010 2011 2012 2013 2014 2015

28.0% 27.3% 27.9% 30.7% 31.1% 32.7%

33.7% 34.4% 34.9% 33.4% 34.9% 34.4%

72.0% 72.7% 72.1% 69.3% 68.9% 67.3%

1,855,615 1,841,834 1,826,046 1,655,617 1,621,231 1,590,321

$ 7.36 $ 7.32 $ 7.32 $ 7.89 $ 7.94 $ 8.64

$ 8.87 $ 9.22 $ 9.15 $ 8.60 $ 8.91 $ 9.09

$ 26.28 $ 26.82 $ 26.20 $ 25.73 $ 25.51 $ 26.40

$ 30.73 $ 31.17 $ 30.39 $ 29.63 $ 30.31 $ 31.41


(1) Excludes amounts paid for early retirement of debt.

(2) The Authority has no statutory debt limit. Senior lien revenue bond limits would be calculated through an additional bonds test (ABT) established in the Authority’s senior lien bond resolution.

Source: Authority audited financial statements.

Ratios of Outstanding Debt, Debt Service and Debt LimitsFiscal Years Ended September 30

2006 2007 2008 2009Outstanding Debt Ratios Outstanding debt by type Senior lien revenue bonds $ 40,670,000 $ 36,500,000 $ 32,155,000 $ 27,630,000 Subordinate lien revenue bonds 39,335,000 70,630,000 69,030,000 67,095,000 Junior subordinate lien revenue bonds 6,815,000 6,815,000 3,635,000 3,635,000 Notes payable 133,962 90,482 44,490 - Total outstanding debt $ 86,953,962 $ 114,035,482 $ 104,864,490 $ 98,360,000

Enplaned passengers 2,120,996 2,195,493 2,202,373 1,837,175 Outstanding debt per enplaned passenger $ 41.00 $ 51.94 $ 47.61 $ 53.54

Operating revenues $ 47,405,122 $ 51,266,840 $ 55,061,122 $ 47,511,021 Ratio of outstanding debt to operating revenues 1.83 2.22 1.90 2.07

Total revenues $ 55,899,872 $ 64,414,534 $ 67,254,926 $ 57,270,115 Ratio of outstanding debt to total revenues 1.56 1.77 1.56 1.72

Debt Service Ratios Debt service Principal (1) $ 4,896,105 $ 5,028,480 $ 5,990,992 $ 6,504,490 Interest 4,385,872 4,991,062 5,403,934 5,135,005 Total debt service $ 9,281,977 $ 10,019,542 $ 11,394,926 $ 11,639,495

Debt service per enplaned passenger $ 4.38 $ 4.56 $ 5.17 $ 6.34

Total expenses $ 47,285,674 $ 49,265,932 $ 51,533,129 $ 57,769,017 Ratio of debt service to total expenses 0.20 0.20 0.22 0.20

Debt Limit (2) N.A. N.A. N.A. N.A.

STATISTICAL 99

2010 2011 2012 2013 2014 2015 $ 22,950,000 $ 8,810,000 $ 4,510,000 $ - $ - $ - 65,075,000 62,960,000 60,730,000 58,385,000 55,930,000 53,345,000 - - - - - - - - - - - - $ 88,025,000 $ 71,770,000 $ 65,240,000 $ 58,385,000 $ 55,930,000 $ 53,345,000

1,855,615 1,841,834 1,826,046 1,655,617 1,621,231 1,590,321 $ 47.44 $ 38.97 $ 35.73 $ 35.26 $ 34.50 $ 33.54

$ 48,757,539 $ 49,394,059 $ 47,842,526 $ 42,594,975 $ 41,350,858 $ 41,986,785 1.81 1.45 1.36 1.37 1.35 1.27

$ 57,017,039 $ 57,407,230 $ 55,492,676 $ 49,056,013 $ 49,145,740 $ 49,957,314 1.54 1.25 1.18 1.19 1.14 33.54

$ 6,700,000 $ 6,950,000 $ 6,530,000 $ 6,855,000 $ 2,455,000 $ 2,585,000 4,775,942 4,761,308 3,621,515 3,288,317 2,944,190 2,819,690 $ 11,475,942 $ 11,711,308 $ 10,151,515 $ 10,143,317 $ 5,399,190 $ 5,404,690

$ 6.18 $ 6.36 $ 5.56 $ 6.13 $ 3.33 $ 3.40

$ 55,100,558 $ 50,532,322 $ 49,480,328 $ 49,562,319 $ 51,281,066 $ 48,056,272 0.21 0.23 0.21 0.20 0.11 0.11

N.A. N.A. N.A. N.A. N.A. N.A.


(1) Net revenues per the Authority’s bond resolutions excludes interest income on restricted funds and certain unrestricted insurance proceeds.

(2) This amount is calculated in accordance with the airport use agreement. See the introduction letter for a description of the Authority’s airport use agreement.

Airport Revenue Bond Coverage Per Bond ResolutionsFiscal Years Ended September 30

2006 2007 2008 2009Senior Lien Revenue Bond Debt Service Coverage Operating revenues $ 47,405,122 $ 51,266,840 $ 55,061,122 $ 47,511,021 Interest income (1) 2,060,252 3,119,822 2,684,419 1,290,242 Transfer from airline reserve fund (2) 1,832,748 1,830,935 2,354,525 2,078,826 Total revenues 51,298,122 56,217,597 60,100,066 50,880,089 Operation and maintenance expenses (30,136,938) (31,587,812) (33,734,007) (30,211,323) Net revenues 21,161,184 24,629,785 26,366,059 20,668,766

Senior lien debt service requirement Series 2001A,B,C 1,307,615 1,305,469 1,305,996 1,307,268 Series 2003 refunding 4,735,763 4,734,563 4,737,362 4,739,196 Total senior lien debt service $ 6,043,378 $ 6,040,032 $ 6,043,358 $ 6,046,464

Senior lien revenue bond debt service coverage 3.50 4.08 4.36 3.42 Required minimum coverage 1.25 1.25 1.25 1.25

Subordinate Lien Revenue Bond Debt Service Coverage Net revenues $ 21,161,184 $ 24,629,785 $ 26,366,059 $ 20,668,766 PFC revenues transferred for subordinate lien debt service 2,864,437 3,563,076 4,659,322 4,875,789 Subtotal 24,025,621 28,192,861 31,025,381 25,544,555 Senior lien debt service (6,043,378) (6,040,032) (6,043,358) (6,046,464) Net revenues available for subordinate lien debt service 17,982,243 22,152,829 24,982,023 19,498,091

Subordinate lien debt service requirement Series 2001 2,864,437 2,865,410 2,865,365 2,864,257 Series 2006 - 697,666 2,294,062 2,572,292 Total subordinate lien debt service $ 2,864,437 $ 3,563,076 $ 5,159,427 $ 5,436,549

Subordinate lien revenue bond debt service coverage 6.28 6.22 4.84 3.59 Required minimum coverage 1.10 1.10 1.10 1.10

Total Revenue Bond Debt Service Coverage Net revenues $ 21,161,184 $ 24,629,785 $ 26,366,059 $ 20,668,766 PFC revenues transferred for subordinate lien debt service 2,864,437 3,563,076 4,659,322 4,875,789 Subtotal 24,025,621 28,192,861 31,025,381 25,544,555

Total revenue bond debt service requirement Senior lien bonds 6,043,378 6,040,032 6,043,358 6,046,464 Subordinate lien bonds 2,864,437 3,563,076 5,159,427 5,436,549 Junior subordinate lien bonds 324,251 366,522 142,229 49,594 Total revenue bond debt service $ 9,232,066 $ 9,969,630 $ 11,345,014 $ 11,532,607

Total revenue bond debt service coverage 2.60 2.83 2.73 2.21 Required minimum coverage 1.00 1.00 1.00 1.00

STATISTICAL 101

Source: Authority audited financial statements and bond resolutions.

2010 2011 2012 2013 2014 2015

$ 48,757,539 $ 49,394,059 $ 47,842,526 $ 42,594,975 $ 41,350,858 $ 41,986,785 675,665 483,890 423,027 408,225 558,471 783,869 4,471,531 2,217,351 1,867,127 1,828,523 170,566 4,015,500 53,904,735 52,095,300 50,132,680 44,831,723 42,079,895 46,786,154 (29,017,766) (30,145,524) (29,286,727) (28,555,886) 31,512,439 (28,389,788) 24,886,969 21,949,776 20,845,953 16,275,837 10,567,456 18,396,366

1,309,878 1,307,078 - - - - 4,737,575 4,736,833 4,738,833 3,157,000 - - $ 6,047,453 $ 6,043,911 $ 4,738,833 $ 3,157,000 $ - $ -

4.12 3.63 4.40 5.16 - - 1.25 1.25 1.25 1.25 1.25 1.25

$ 24,886,969 $ 21,949,776 $ 20,845,953 $ 16,275,837 $ 10,567,456 $ 18,396,366

4,876,327 4,878,142 4,897,807 4,836,868 4,805,218 4,763,643 29,763,296 26,827,918 25,743,760 21,112,705 15,372,674 23,160,009 (6,047,453) (6,043,911) (4,738,833) (3,157,000) - - 23,715,843 20,784,007 21,004,927 17,955,705 15,372,674 23,160,009

2,864,665 2,863,990 2,882,873 2,826,757 2,843,423 2,844,923 2,572,458 2,575,642 2,576,642 2,570,475 2,573,183 2,516,683 $ 5,437,123 $ 5,439,632 $ 5,459,515 $ 5,397,232 $ 5,416,606 $ 5,361,606

4.36 3.82 3.85 3.33 2.84 4.32 1.10 1.10 1.10 1.10 1.10 1.10

$ 24,886,969 $ 21,949,776 $ 20,845,953 $ 16,275,837 $ 10,567,456 $ 18,396,366 4,876,327 4,878,142 4,897,807 4,836,868 4,805,218 4,763,643 29,763,296 26,827,918 25,743,760 21,112,705 15,372,674 23,160,009

6,047,453 6,043,911 4,738,833 3,157,000 - - 5,437,123 5,439,632 5,459,515 5,397,232 5,416,606 5,361,606 10,785 - - - - - $ 11,495,361 $ 11,483,543 $ 10,198,348 $ 8,554,232 $ 5,416,606 $ 5,361,606

2.59 2.34 2.52 2.47 2.84 4.32 1.00 1.00 1.00 1.00 1.00 1.00


Population in the Air Service AreaAs of July 1 (April 1 for U.S. Census Data)

2006 2007 2008 2009Primary service area Pima County, Arizona 959,474 977,258 984,032 984,274 Annual % change 2.1% 1.9% 0.7% 0.0%

Secondary service area Cochise County, Arizona 128,623 129,522 130,567 130,296 Graham County, Arizona 34,823 35,485 36,453 37,281 Greenlee County, Arizona 8,202 8,278 8,808 8,533 Pinal County, Arizona 304,889 333,977 358,190 364,995 Santa Cruz County, Arizona 44,929 46,519 47,016 47,384 Total secondary service area 521,466 553,781 581,034 588,489 Annual % change 12.7% 6.2% 4.9% 1.3%

Total primary and secondary service areas 1,480,940 1,531,039 1,565,066 1,572,763 Annual % change 5.6% 3.4% 2.2% 0.5%

State of Arizona 6,116,409 6,274,981 6,368,649 6,389,081 Annual % change 3.2% 2.6% 1.5% 0.3%

United States 298,362,973 301,290,332 304,059,724 307,006,550 Annual % change 1.0% 1.0% 0.9% 1.0%

Unemployment Rates in the Air Service AreaAnnual Average

2006 2007 2008 2009Primary Service Area Pima County, Arizona 3.9% 3.6% 5.6% 8.8%

Secondary service area Cochise County, Arizona 4.4% 4.0% 5.6% 7.8% Graham County, Arizona 5.0% 4.2% 6.8% 14.7% Greenlee County, Arizona 3.7% 3.2% 5.1% 18.5% Pinal County, Arizona 4.9% 4.5% 7.1% 12.0% Santa Cruz County, Arizona 7.4% 7.3% 10.6% 15.4% Total secondary service area 4.9% 4.5% 6.9% 11.4%

Total primary and secondary service areas 4.2% 3.9% 6.0% 9.7%

State of Arizona 4.1% 3.7% 6.0% 9.9%

United States 4.6% 4.6% 5.8% 9.3%

Source: Arizona Department of Administration, Office of Employment and Population Statistics, The State Demographer’s Office; except for 2010, which is based on census data from the U.S. Census Bureau.

Source: Arizona Department of Administration, Office of Employment and Population Statistics, in cooperation with the U.S. Dept of Labor, Bureau of Labor Statistics. Local Area Unemployment Statistics (LAUS) data.

STATISTICAL 103

2010 2011 2012 2013 2014 2015

980,263 986,081 990,380 996,046 1,007,162 1,009,371 -0.4% 0.6% 0.4% 0.6% 1.1% 0.2%

131,346 130,537 130,752 130,906 129,628 129,112 37,220 37,710 37,314 37,872 38,315 38,475 8,437 8,380 8,599 10,913 10,476 10,555 375,770 384,231 389,192 393,813 396,237 406,468 47,420 48,088 48,724 49,218 49,554 50,270 600,193 608,946 614,581 622,722 624,210 634,880 2.0% 1.5% 0.9% 1.3% 0.2% 1.7% 1,580,456 1,595,027 1,604,961 1,618,768 1,631,372 1,644,251 0.5% 0.9% 0.6% 0.9% 0.8% 0.8%

6,392,017 6,438,178 6,498,569 6,581,054 6,667,241 6,758,251 0.1% 0.7% 0.9% 1.3% 1.3% 1.4%

308,745,538 311,582,564 313,873,685 316,128,839 317,297,938 321,422,019 0.6% 0.9% 0.7% 0.7% 0.4% 1.3%

2010 2011 2012 2013 2014 2015

9.4% 8.3% 7.3% 6.9% 6.3% 5.7%

8.8% 8.8% 8.2% 8.5% 8.3% 7.6% 14.2% 10.4% 8.9% 8.1% 6.9% 7.7% 11.4% 8.2% 6.0% 6.7% 6.5% 8.5% 11.6% 10.3% 8.9% 8.4% 7.4% 6.6% 17.1% 17.0% 17.2% 18.0% 16.2% 14.6% 11.5% 10.4% 9.3% 9.1% 8.2% 7.6%

10.1% 9.0% 7.9% 7.7% 6.9% 6.4%

10.5% 9.5% 8.3% 8.0% 8.0% 6.0%

9.6% 8.9% 8.1% 7.4% 6.2% 5.1%


Major Employers in the Air Service AreaFull-time Equivalent Employees

Employer Industry Sector 2006 2007 2008 2009University of Arizona Education 10,282 10,354 10,535 10,575Raytheon Missile Systems Manufacturing 10,756 11,184 12,515 11,539State of Arizona State Government 9,742 9,927 10,754 9,329Davis-Monthan Air Force Base Military 8,233 8,233 7,701 7,509Tucson Unified School District No. 1 Education 7,623 7,419 8,018 7,227Pima County Local Government 6,765 7,290 6,954 6,235 Banner-University Medicine Health Services 2,969 3,094 3,304 3,552 U.S. Customs and Border Protection Federal Government 2,500 2,763 2,975 3,468Freeport-McMoRan Inc. Mining 4,123 4,900 5,840 5,987Wal-Mart Stores, Inc. Retail 4,980 5,625 5,805 6,715U.S. Army Intelligence Center, Fort Huachuca Military 13,098 9,119 6,701 6,463City of Tucson Local Government 5,306 5,848 5,848 5,635Tohono O’odham Nation Local Government 3,665 3,825 2,725 4,553Carondelet Health Network Health Services 3,751 4,319 4,766 4,570TMC HealthCare Health Services 3,276 3,474 3,038 3,184Asarco LLC Mining 1,689 1,950 2,185 2,575Albertsons (Includes Safeway) Retail (3) (3) (3) (3)Corrections Corporation of America Government Services 443 1,441 1,778 2,468Southern Arizona V.A. Health Care System Health Services 1,665 1,730 1,729 2,026Afni, Inc. Call Center 1,437 1,471 1,409 1,628Pima Community College Education 2,248 2,211 2,325 2,299Sunnyside Unified School District Education 2,126 2,690 2,685 2,358Fry’s Food and Drug Stores Retail 2,063 1,806 2,268 2,668Pinal County Local Government 1,830 2,134 2,321 2,450APAC Customer Services Inc. Call Center (1) (1) (1) (1)Citi Call Center 1,201 2,000 1,900 2,400Amphitheater Unified School District Education 2,174 2,187 2,096 2,096Marana Unified School District Education 1,663 1,776 1,866 1,836Northwest Medical Center Health Services 1,900 1,808 2,124 1,671Target Corp. Retail 1,200 1,200 1,623 1,800 Vail School District Education (1) (1) (1) (1)Casino Del Sol Resort Spa and Conference Center Entertainment (1) (1) (1) (1)U.S. Postal Service Federal Government 1,121 1,837 1,800 1,930Walgreen Co. Retail 1,351 1,381 1,303 1,443Bashas’ Inc. Retail 2,021 1,938 1,938 1,938International Business Machines Corp. Manufacturing 1,801 1,750 1,457 1,432University Physicians Healthcare Health Services 1,731 1,904 1,856 2,039

Source: Arizona Daily Star, Star 200 survey. Participation in the survey is voluntary. Includes employers in the Authority’s primary and secondary service areas.

(1) Data not provided and/or not a major employer. (2) University Physicians merged with the University of Arizona Health Network in 2011, now Banner-University Medicine.

(3) Albertsons merged with Safeway in 2015.

STATISTICAL 105

Percentage of Total 2010 2011 2012 2013 2014 2015 Employment 10,363 10,481 10,681 10,846 11,047 11,235 1.8% 12,140 10,500 10,500 10,300 9,933 9,600 1.5% 8,708 8,866 9,061 8,807 9,439 8,524 1.4% 7,755 8,462 8,566 9,100 8,933 8,335 1.3% 7,012 6,709 6,674 6,790 6,525 7,134 1.1% 6,511 6,403 6,170 6,076 7,328 7,023 1.1% 3,542 5,982 5,594 6,099 6,329 6,542 1.0% 3,530 3,669 6,000 6,500 4,135 6,470 1.0% 3,997 4,803 5,068 5,463 5,600 5,800 1.0% 7,192 7,308 7,300 7,450 5,200 5,400 0.9% 6,236 6,225 6,198 5,096 5,717 5,314 0.9% 5,399 4,930 4,541 4,585 4,845 4,882 0.8% 4,353 4,353 4,350 4,350 4,350 4,350 0.7% 4,566 4,690 4,635 3,668 3,476 3,943 0.6% 3,050 2,966 2,904 2,977 2,954 2,976 0.5% 2,125 2,262 2,348 2,297 2,366 2,427 0.4% (3) (3) (3) (3) (3) 2,301 0.4% 2,512 2,487 2,482 2,314 2,146 2,300 0.4% 2,117 2,208 2,151 2,182 2,450 2,255 0.4% 1,893 2,100 2,198 2,199 1,950 2,220 0.4% 2,309 2,336 2,386 2,384 2,177 2,207 0.4% 2,120 2,145 2,125 2,083 2,000 2,200 0.4% 3,109 3,100 3,100 2,700 2,024 2,136 0.3% 2,455 2,340 1,952 1,993 1,931 1,917 0.3% 1,475 1,570 1,650 1,777 1,904 1,904 0.3% 2,500 2,000 2,000 2,000 1,900 1,800 0.3% 1,965 1,924 1,920 1,833 1,814 1,789 0.3% 1,755 1,606 1,600 1,657 1,706 1,754 0.3% 1,658 1,758 1,532 1,757 1,722 1,651 0.3% 1,900 1,773 1,639 1,640 1,640 1,640 0.3% 1,444 1,362 1,442 1,469 1,578 1,625 0.3% (1) (1) (1) 1,300 1,500 1,600 0.3% 1,810 1,899 1,562 1,558 1,226 1,496 0.2% 1,511 1,726 1,399 1,420 1,420 1,459 0.2% 1,900 1,800 1,800 1,800 950 1,002 0.2% 1,400 1,350 1,350 1,375 915 915 0.1% 2,219 (2) (2) (2) (2) (2) 0.0% 1,685 1,685 1,685 1,685 1,685 (3) 0.0%


Authority EmployeesAuthorized Full-Time Equivalent Positions as of September 30

2006 2007 2008 2009 2010Management 3.00 4.25 4.25 4.25 4.00 Legal 2.50 2.50 2.50 2.50 4.00 Public Information/Government Affairs 4.00 4.00 4.00 4.00 4.00 Administration/Properties 9.00 9.00 9.00 9.00 9.00 Information Technology and Telecommunications 11.00 11.00 11.00 11.00 11.00 Team Member Services and Development 5.50 6.00 6.00 6.00 5.00 Administrative Services 11.75 9.50 9.50 9.50 9.00 Business Development and Marketing - - - - - Office and Records Management - - - - - Finance 9.75 9.75 9.75 9.75 10.00 Planning and Development 30.75 31.75 31.75 31.75 31.00 Operations Management 4.00 3.00 3.00 3.00 7.00 Operations - 5.00 5.00 5.00 - Police 53.50 53.50 52.50 53.50 53.50 Fire 18.00 19.00 19.00 19.00 18.00 Communications/Dispatch 14.00 13.00 13.00 13.00 13.00 Custodial 55.00 54.00 54.00 54.00 53.00 Flight Line Services 33.00 31.50 31.50 29.50 29.00 Maintenance 41.00 41.00 41.00 41.00 43.00 Ryan Airfield 3.00 2.50 2.50 2.50 - Total 308.75 310.25 309.25 308.25 303.50


STATISTICAL 107

2011 2012 2013 2014 2015 4.00 4.00 4.00 4.00 3.00 4.00 3.00 3.00 3.00 3.00 - - - - - 7.00 7.00 7.00 8.00 7.00 11.00 9.00 9.00 9.00 9.00 5.00 5.00 5.00 5.00 4.00 9.00 9.00 8.00 7.00 6.00 7.00 5.00 4.00 4.00 4.00 - - - - 9.00 10.00 9.00 9.00 8.00 7.00 25.00 22.00 21.00 29.00 24.50 7.00 7.00 9.00 3.00 2.00 - - - 7.25 8.00 51.00 48.50 47.50 46.00 44.00 17.00 16.50 17.00 17.00 17.00 12.00 12.00 12.00 12.00 13.00 53.00 44.00 43.00 42.00 42.00 25.00 23.00 16.00 2.00 - 42.00 40.00 40.00 38.50 37.00 - - - - 289.00 264.00 254.50 244.75 239.50


Airport Information Tucson International AirportAs of September 30

(1) Includes a limited service FBO (fueling, tie-downs and pilot facilities) owned and operated by the Authority. Fueling services ended 1/31/2014.

(2) Effective 10/01/2012 TAA’s FAA category changed to, commercial services, small hub.


Airport code: TUS FAA category: Commercial service, small hub (2)Location: 8 miles south of downtown Tucson, ArizonaElevation: 2,641 feet above sea levelInternational: 24/7 U.S. Customs Federal Inspection StationTower: FAA-staffed 24/7 2006 2007 2008 2009

Land area (acres): 8,244 8,343 8,343

Runways: 11L-29R (main) 10,996 x 150 ft. 10,996 x 150 ft. 10,996 x 150 ft. 10,996 x 150 ft. 3-21 (crosswind) 7,000 x 150 ft. 7,000 x 150 ft. 7,000 x 150 ft. 7,000 x 150 ft. 11R-29L (GA & commuter) 8,408 x 75 ft. 8,408 x 75 ft. 8,408 x 75 ft. 8,408 x 75 ft.

Main terminal: Airlines (sq. ft.) 201,851 202,451 202,451 202,451 Concessions 33,555 35,067 35,067 35,067 TSA & security checkpoints 10,401 10,401 10,401 10,401 Public/common 116,273 115,300 115,300 115,300 Authority use 13,338 12,076 12,076 12,076 Mechanical 76,607 76,730 76,730 76,730 Total (sq. ft.) 452,025 452,025 452,025 452,025

Number of gate positions 19 19 19 19 Number of active gates 15 18 18 18 Apron (sq. ft.) 1,474,485 1,474,485 1,474,485 1,474,485

Consolidated Number of companies 7 7 7 7rental car facility: Quick turnaround facilities 7 7 7 7 Customer service building (sq. ft.) 18,000 18,000 18,000 18,000 3-level parking structure (spaces) Rental car use 1,347 697 697 697 Airport employee use 661 661 661 661 Public parking - 605 605 605

Public parking lots Hourly 469 469 469 469(surface spaces): Daily 908 908 908 908 Covered economy 308 308 308 308 Uncovered economy 5,337 5,337 5,337 5,337 Total 7,022 7,022 7,022 7,022

Air cargo: Number of buildings 3 3 3 3 Total sq. ft. 35,000 35,000 35,000 35,000 Apron (sq. ft.) 819,000 819,000 819,000 819,000

General aviation: Number of FBOs (1) 5 5 5 5 Apron (sq. ft.) 1,301,767 1,301,767 1,301,767 1,301,767

STATISTICAL 109

2010 2011 2012 2013 2014

8,343 8,343 8,343 8,343 8,343

10,996 x 150 ft. 10,996 x 150 ft. 10,996 x 150 ft. 10,996 x 150 ft. 10,996 x 150 ft. 7,000 x 150 ft. 7,000 x 150 ft. 7,000 x 150 ft. 7,000 x 150 ft. 7,000 x 150 ft. 8,408 x 75 ft. 8,408 x 75 ft. 8,408 x 75 ft. 8,408 x 75 ft. 8,408 x 75 ft.

202,451 202,451 202,451 202,451 202,451 35,067 35,067 35,067 35,067 33,967 10,401 10,401 10,401 10,401 10,401 115,300 115,300 115,300 115,300 115,300 12,076 12,076 12,076 12,076 23,862 76,730 76,730 76,730 76,730 76,730 452,025 452,025 452,025 452,025 452,025

19 19 19 19 19 18 18 18 18 18 1,941,985 1,941,985 1,941,985 1,941,985 1,941,985

7 7 7 7 7 7 7 7 7 7 18,000 18,000 18,000 18,000 18,000

697 697 697 697 697 661 661 661 661 661 605 605 605 605 605 469 469 469 469 469 908 908 908 908 908 308 308 308 308 308 5,337 5,337 5,337 5,337 5,337 7,022 7,022 7,022 7,022 7,022

3 3 3 3 3 35,000 35,000 35,000 35,000 35,000 819,000 819,000 819,000 819,000 819,000

5 5 5 5 4 1,301,767 1,301,767 1,301,767 1,301,767 1,301,767

2015

8,343

10,996 x 150 ft.7,000 X 150 ft.

8,408 x 75 ft.

202,451 23,281 10,401

115,300 23,862

76,730 452,025

19 18

1,941,985

7 7

18,000

697 661

605

469 908 308

5,337 7,022

3 35,000

819,000

3 1,301,767


Airport InformationRyan AirfieldAs of September 30

Airport code: RYNFAA category: General aviationLocation: 12 miles southwest of downtown Tucson, ArizonaElevation: 2,417 feet above sea levelInternational: No international facilitiesTower: Contract - staffed 6:00 A.M. - 8:00 P.M. daily 2006 2007 2008 2009

Land area (acres): 1,804 1,804 1,804 1,804

Runways: 6R-24L 5,500 x 75 ft. 5,500 x 75 ft. 5,500 x 75 ft. 5,500 x 75 ft. 6L-24R 4,900 x 75 ft. 4,900 x 75 ft. 4,900 x 75 ft. 4,900 x 75 ft. 15-33 (crosswind) 4,000 x 75 ft. 4,000 x 75 ft. 4,000 x 75 ft. 4,000 x 75 ft.

Terminal: None None None None

FBO services: Number of FBOs (1) 1 1 1 1 Apron (sq. ft.) 465,000 465,000 465,000 465,000

(1) Includes a limited service FBO (fueling, tie-downs and pilot facilities) owned and operated by the Authority. Fueling services ended 12/31/2013.

Aircraft maintenance services are offered by various private businesses on the airport.


STATISTICAL 111

2010 2011 2012 2013 2014 2015

1,804 1,804 1,804 1,804 1,804 1,804

5,500 x 75 ft. 5,500 x 75 ft. 5,500 x 75 ft. 5,500 x 75 ft. 5,500 x 75 ft. 5,500 x 75 ft. 4,900 x 75 ft. 4,900 x 75 ft. 4,900 x 75 ft. 4,900 x 75 ft. 4,900 x 75 ft. 4,900 x 75 ft. 4,000 x 75 ft. 4,000 x 75 ft. 4,000 x 75 ft. 4,000 x 75 ft. 4,000 x 75 ft. 4,000 x 75 ft.

None None None None None None

1 1 1 1 1 1 465,000 465,000 465,000 465,000 436,000 436,000


Source: Authority records based on airline reporting.

Passenger, Cargo and Mail Summary Tucson International AirportFiscal Years Ended September 30

2006 2007 2008 2009Passengers Enplaned 2,120,996 2,195,493 2,202,373 1,837,175 Deplaned 2,106,792 2,178,878 2,192,832 1,832,749 Total 4,227,788 4,374,371 4,395,205 3,669,924

Annual % change 4.6% 3.5% 0.5% -16.5%

Air Freight (pounds) All-cargo carriers Enplaned 31,723,581 30,376,299 29,434,704 26,312,873 Deplaned 49,210,617 47,832,536 43,990,112 33,482,706 Total 80,934,198 78,208,835 73,424,816 59,795,579

Annual % change 10.3% -3.4% -6.1% -18.6%

Passenger carriers Enplaned 1,199,723 1,060,634 851,369 714,317 Deplaned 2,744,285 2,453,912 2,661,911 2,312,730 Total 3,944,008 3,514,546 3,513,280 3,027,047

Annual % change 8.0% -10.9% 0.0% -13.8%

Mail (pounds) Enplaned 744,882 189,674 1,871 243 Deplaned 2,258,600 608,901 10,614 8,852 Total 3,003,482 798,575 12,485 9,095

Annual % change -30.0% -73.4% -98.4% -27.2%

STATISTICAL 113

2010 2011 2012 2013 2014 2015

1,855,615 1,841,834 1,826,046 1,655,617 1,621,231 1,590,321 1,853,563 1,835,060 1,823,737 1,653,003 1,618,618 1,591,580 3,709,178 3,676,894 3,649,783 3,308,620 3,239,849 3,181,901

1.1% -0.9% -0.7% -9.3% -2.1% -1.8%

27,826,292 25,242,128 26,487,591 29,923,629 29,713,492 27,929,293 38,460,356 33,726,997 42,433,770 36,390,827 33,480,907 36,302,965 66,286,648 58,969,125 68,921,361 66,314,456 63,194,399 64,232,258

10.9% -11.0% 16.9% -3.8% -4.7% 1.6%

938,253 840,931 915,005 671,255 581,698 812,252 2,146,039 1,798,178 1,595,464 1,374,109 1,020,436 1,140,052 3,084,292 2,639,109 2,510,469 2,045,364 1,602,134 1,952,304

1.9% -14.4% -4.9% -18.5% -21.7% 21.9%

189 1,681 5,391 5,291 5,419 3,041 9,324 11,313 6,991 9,301 10,979 25,485 9,513 12,994 12,382 14,592 16,398 28,526

4.6% 36.6% -4.7% 17.8% 12.4% 74.0%


(1) Data collected during Ryan UNICOM regular hours of operation (6:00 a.m. - 8:00 p.m.).

Source: FAA “Air Traffic Activity” reports, Tucson International Airport air traffic control tower records, and Ryan air traffic control tower records.

Note: Where available, information for regional affiliate carriers is included with the associated major carriers.Predecessor airline information is included in the current carrier totals.

Source: Authority records based on airline reports.

Aircraft Operations SummaryFiscal Years Ended September 30

2006 2007 2008 2009Tucson International Airport Air carrier 44,767 42,666 43,078 35,551 Air taxi 29,239 28,158 30,481 21,953 Military 43,050 31,601 28,437 29,412 General aviation 164,337 154,215 129,965 94,470 Total 281,393 256,640 231,961 181,386

Annual % change 3.0% -8.8% -9.6% -21.8%

Ryan Airfield (1) Air carrier - - 2 2 Air taxi 2 4 4 9 Military 4,085 3,374 3,210 5,287 General aviation 177,556 216,745 197,832 121,881 Total 181,643 220,123 201,048 127,179

Annual % change 7.4% 21.2% -8.7% -36.7%

Enplaned Passengers By Scheduled CarrierFiscal Years Ended September 30

Carrier 2006 % of Total 2007 2008 2009 2010Southwest Airlines 632,624 28.3% 638,929 644,277 594,120 606,913American Airlines 481,945 21.9% 442,813 419,600 391,376 388,036United Airlines 350,695 17.8% 383,032 342,893 271,318 288,570US Airways 309,694 13.9% 289,967 268,939 237,138 225,715Delta Air Lines 240,856 13.0% 236,613 252,517 213,295 212,276Alaska Airlines 52,371 2.3% 53,175 56,856 49,490 50,134Frontier Airline 45,139 2.0% 65,351 72,904 74,500 79,777Sun Country Airlines - 0.0% - 5,772 5,932 4,194Aerolitoral 7,401 0.3% 5,442 8,249 6 -ExpressJet Airlines - 0.0% 41,549 108,524 - -JetBlue Airways 271 0.0% 38,622 21,842 - - Total 2,120,996 100.0% 2,195,493 2,202,373 1,837,175 1,855,615

STATISTICAL 115

2010 2011 2012 2013 2014 2015

35,143 35,911 34,423 30,593 30,527 28,624 23,388 21,959 20,309 20,417 19,308 20,126 30,687 27,569 24,887 25,133 24,693 28,050 79,265 72,893 65,545 62,120 64,892 64,622 168,483 158,332 145,164 138,263 139,420 141,422

-7.1% -6.0% -8.3% -4.8% 0.8% 1.4%

- - - - - 2 4 20 - 2 - - 4,190 3,446 9,744 14,914 14,675 20,464 117,518 108,541 107,531 106,658 103,135 97,017 121,712 112,007 117,275 121,574 117,810 117,483

-4.3% -8.0% 4.7% 3.7% -3.1% -0.3%

2011 2012 2013 2014 % of Total 2015 % of Total 618,007 623,484 592,375 530,680 32.7% 506,260 31.8% 405,851 428,093 409,400 419,012 25.8% 435,205 27.4% 263,890 262,245 222,485 198,926 12.3% 203,459 12.8% 220,409 210,701 195,861 218,994 13.5% 193,757 12.2% 199,841 199,117 181,950 179,842 11.1% 181,236 11.4% 52,967 57,391 53,546 73,777 4.6% 70,404 4.4% 80,869 45,015 - - 0.0% - 0.0% - - - - 0.0% - 0.0% - - - - 0.0% - 0.0% - - - - 0.0% - 0.0% - - - - 0.0% - 0.0% 1,841,834 1,826,046 1,655,617 1,621,231 100.0% 1,590,321 100.0%


Note: Where available, information for regional affiliate carriers is included with the associated major carriers. Predecessor airline information is included in the current carrier totals.

Source: Authority records based on airline reports.

Scheduled Carrier Landed Weights (1,000 lbs. Units) Fiscal Years Ended September 30

Carrier 2006 % of Total 2007 2008 2009 2010

Passenger carriers Southwest Airlines 730,408 30.0% 794,498 880,596 787,992 762,806 American Airlines 516,683 21.2% 471,519 446,023 413,082 399,509 US Airways 374,502 15.4% 346,905 319,098 262,784 262,163 United Airlines 414,554 17.0% 444,995 395,125 301,105 342,923 Delta Air Lines 274,575 11.3% 271,156 273,467 218,425 230,247 Alaska Airlines 55,651 2.3% 51,019 61,490 52,302 52,205 Frontier Airlines 58,127 2.4% 92,775 103,673 95,306 91,767 Sun Country Airlines - 0.0% - 7,300 8,367 5,983 Aerolitoral 10,326 0.4% 10,036 10,559 43 - ExpressJet Airlines - 0.0% 71,278 167,190 - - JetBlue Airways 486 0.0% 55,899 35,862 - - Total 2,435,331 100.0% 2,610,080 2,700,383 2,139,406 2,147,603 Cargo carriers Federal Express 149,739 55.4% 140,682 136,694 141,821 144,005 Ameriflight 956 3.0% 3,075 4,347 9,706 8,243 UPS 57,094 28.1% 58,800 62,768 22,470 - DHL 51,570 13.5% 31,204 29,171 6,630 - Total 259,359 100.0% 233,761 232,980 180,627 152,248 Grand total 2,694,690 2,843,841 2,933,363 2,320,033 2,299,851

STATISTICAL 117

2011 2012 2013 2014 % of Total 2015 % of Total

800,968 810,352 708,544 600,950 33.6% 582,838 33.5% 418,232 437,222 429,201 434,162 24.3% 456,515 26.2% 278,913 246,542 239,262 270,567 15.1% 225,991 13.1% 315,044 299,888 242,435 215,279 12.1% 217,723 12.5% 208,625 213,304 191,419 188,555 10.6% 185,116 10.6% 52,495 58,787 53,504 76,872 4.3% 71,231 4.1% 88,674 46,009 - - 0.0% - 0.0% - - - - 0.0% - 0.0% - - - - 0.0% - 0.0% - - - - 0.0% - 0.0% - - - - 0.0% - 0.0% 2,162,952 2,112,104 1,864,365 1,786,385 100.0% 1,739,415 100.0%

139,971 145,331 149,664 146,110 94.0% 149,500 94.8% 8,539 9,044 9,617 9,323 6.0% 8,211 5.2% - - - - 0.0% - 0.0% - - - - 0.0% - 0.0% 148,510 154,374 159,281 155,433 100.0% 157,711 100.0% 2,311,462 2,266,479 2,023,646 1,941,818 1,897,126


2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Number of daily nonstop destinations 17 24 18 15 15 15 14 14 14 13 Number of nonstop flights per day Albuquerque 2 2 2 2 2 2 2 - - - Atlanta 2 2 2 2 2 2 2 2 2 2 Austin - 2 - - - - - - - - Charlotte - - 1 - - - - - - - Chicago Midway 1 2 2 1 1 1 2 2 1 1 Chicago O’Hare 3 3 2 2 2 2 2 1 1 1 Dallas/Fort Worth 8 8 7 7 7 7 7 7 7 6 Denver 6 6 6 7 8 7 4 4 5 5 El Paso - 1 - - - - - - - - Hermosillo, Mexico 1 1 1 - - - - - - - Houston Bush 4 4 4 4 4 4 4 4 4 3 Kansas City - 1 - - - - - - - - Las Vegas 8 7 5 5 5 5 4 4 4 3 Los Angeles International 10 11 10 10 10 12 9 9 8 8 Minneapolis 1 1 1 1 1 1 - - - - Oakland - - 1 - - - - - - - Ontario, CA - 3 - - - - - - - - New York Kennedy 1 1 - - - - - - - - Newark - 1 - - - - - - - - Portland - - - - - - - - 1 - Phoenix 11 11 9 10 9 9 8 9 9 10 Sacramento - 2 - - - - - - - - Salt Lake City 4 5 4 3 4 3 3 3 3 3 San Antonio - 2 - - - - - - - - San Diego 3 3 4 4 3 3 3 3 3 3 San Francisco 1 1 1 1 1 2 1 1 1 1 Seattle 1 1 1 1 1 1 1 1 1 1 Total 67 81 63 60 60 61 52 50 50 47

Average scheduled seats per day 7,004 7,804 6,546 6,081 6,245 5,949 5,518 4,990 5,041 4,634

Scheduled Air Service InformationTucson International Airport Month of September

Source: Official Airline Guide.

7250 South Tucson Boulevard, Suite 300 Tucson, Arizona 85756 I 520.573.8100

2015 - fly tucson · ii tucson airport authority 2015 cafr 2015 board of directors and members...

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